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Fedwire 
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority.)
      

The Federal Reserve's funds and securities transfer service.  It connects Federal Reserve banks and branches, U.S. government agencies such as the Treasury, and some 8,000 depository institutions.  All Fedwire transfers are completed on the day they are initiated, usually in a matter of minutes.  They are guaranteed final by the central bank when the receiving institution is notified of the credit to its account.  The Depository Institutions Deregulation and Monetary Control Act of 1980 required pricing of funds and securities transfers as well as other Fed services and gave non-member depository institutions direct access to Fedwire.  Fedwire may be used by depository institutions to move funds resulting from the purchase or sale of federal funds, to move balances to correspondent banks and to send funds to other institutions on behalf of their customers.  Transfers on behalf of bank customers include funds associated with the purchase or sale of securities, the replenishment of business demand deposits and other time-sensitive or large payments.  The U.S. Treasury, the Federal Reserve, and other federal agencies use Fedwire extensively to disburse and collect funds.

Because of potential risk on the large-dollar funds transfer networks, the Board of Governors of the Federal Reserve introduced a risk-reduction policy in March 1986.  The policy is aimed at controlling and reducing daylight overdrafts which occur when an institution has sent funds over Fedwire in excess of the balance in its reserve or clearing account, or has sent more funds over the Clearing House Interbank Payment System.  As fiscal agent of the United States, the New York Fed provides electronic payments services for the U.S. Treasury's ACH-based program for direct deposit of federal recurring payments.  These payments include Social Security, Veterans Administration benefits and federal salary payments.

Source:  Adapted from Fedwire, Federal Reserve Bank of New York.


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