Fedwire Funds Transfer Systemseminar.ppt

ISHWARYA.AVIJAYARAGHAVAN.P

What is Fedwire?

Fedwire stands for Federal Reserve Wire Network.  It is a high-speed electronic communications network that

links the Federal Reserve Board of Governors, the 12 Federal Reserve Banks and the 24 branches, the U.S. Treasury Department, and other federal agencies.

What does a Fedwire look like• A Fedwire is an electronic transmission.  • The transmission contains

• inter-bank codes that are changed continually• a reference number• the names of the sending and receiving banks• the transfer amount• the name and account number of the sending account

holder • the receiving account holder. 

What does a Fedwire look like?

A Fedwire is an electronic transmission.  The transmission contains

inter-bank codes that are changed continually a reference number the names of the sending and receiving banks the transfer amount the name and account number of the sending account

holder the receiving account holder. 

General Background The Fedwire

owned and operated by the Federal Reserve System is a real-time gross settlement (RTGS) system consists of a set of procedures and computer

applications to route and settle payment review payment orders for syntax errors, query and

update account balances, and notify participants of related credits and debits to their accounts.

is supported by the Federal Reserve's FEDNET national communications network

Operating Hours

The Fedwire Funds Service business day begins at 9:00 p.m. eastern time (ET) on the preceding calendar day and ends at 6:30 p.m. ET, Monday through Friday, excluding designated holidays.

IST : 7.30 a.m to 5 .00 a.m

Fedwire Usage Approximately 9,500 participants are currently able to

initiate or receive funds transfers over Fedwire.

Daylight OverdraftAn overdraft that must be repaid by the close of business

the same day. U.S Federal Reserve allows daylight overdrafts, Hong Kong does not

Pricing

The Monetary Control Act or 1980, requires a federal reserve to recover fully the cost associated with the provision of the most financial services it provides

Who has access to Fedwire?Federal Reserve Member banksFinancial institutions that have depository

accounts with the Federal ReserveForeign banks located in the U.S.

Fedwire Participants Depository institutions Agencies and branches of foreign banks Member banks of the Federal Reserve System U.S. Treasury and authorized agencies Foreign central banks, foreign monetary authorities,

foreign governments, and certain international organizations; and

Any other entities authorized by a Reserve Bank

How is it done?

Basic Domestic Transfers:Tranferiing BANK -> FEDERAL RESERVE -> RECEIVING

BANK

When correspondent Bank is Involved:YOUR BANK -> MEMBER BANK -> FEDERAL RESERVE ->

RECEIVING BANK  When Offshore (Overseas) Banks are Involved:

YOUR BANK -> FEDERAL RESERVE -> CORRESPONDENT BANK -> RECEIVING BANK

How Fedwire Works.pptx

Fedwire

complies with each of the 10 Core Principlesmeets the preferred standards for settlement

assets and finalityU.S. law provides a well-established legal

foundation for Fedwire and settlement finality.

Core Principles of FedwireCore Principle I: The system should have

a well founded legal basis under all relevant jurisdictions.

Core Principle II: The system's rules and procedures should enable participants to have a clear understanding of the system's impact on each of the financial risks they incur through participation in it.

Core Principle III: The system should have clearly defined procedures for the management of credit risks and liquidity risks, which specify the respective responsibilities of the system operator and the participants and which provide appropriate incentives to manage and contain those risks.

Core Principle IV: The system should provide prompt final settlement on the day of value, preferably during the day and at a minimum at the end of the day.

Core Principle V: A system in which multilateral netting takes place should, at a minimum, be capable of ensuring the timely completion of daily settlements in the event of an inability to settle by the participant with the largest single settlement obligation.

Core Principle VI: Assets used for settlement should preferably be a claim on the central bank; where other assets are used, they should carry little or no credit risk and little or no liquidity risk.

Core Principle VII: The system should have a high degree of security and operational reliability and should have contingency arrangements for timely completion of daily processing.

Core Principle VIII: The system should provide a means of making payments which is practical for its users and efficient for the economy.

Core Principle IX: The system should have objective and publicly disclosed criteria for participation, which permit fair and open access.

Core Principle X: The system's governance arrangements should be effective, accountable, and transparent.

Fedwire is used for Large dollar time-sensitive payments

(>3M) Funds transfers between reserve banks Purchases or sales of Federal Funds

transfers between correspondent banks Sales of book-entry U.S. Government

securitiesCollection of tax and loan accounts in commercial banks

TAN Q