Fedwire Funds Service
Fedwire Funds Service is a real-time gross settlement system (RTGS) enabling participants to transmit and receive payment orders between each other and on behalf of their customers. Real-time gross settlement means that the clearing and settlement of each transaction occurs continuously during the processing day. Payment to the receiving participant (payee) over Fedwire Funds Service is final and irrevocable when the Federal Reserve Bank either credits the amount of the payment order to the receiving participant's Federal Reserve Bank reserve account or sends notice to the receiving participant, whichever is earlier.
Fedwire Funds Service participants must maintain an account with a Federal Reserve Bank. Because of this requirement, non-financial organizations are not permitted direct access to Fedwire Funds Service, although these entities may use these services indirectly as customers of deposit-taking financial institutions.Subject to the Federal Reserve Bank's and the Federal Reserve Board's risk reduction policies, where applicable, entities authorized by law, regulation, policy, or agreement to be participants include depository institutions, agencies and branches of foreign banks, member banks of the Federal Reserve System, the Treasury and any entity specifically authorized by federal statute to use the Reserve Banks as fiscal agents or depositories, entities designated by the Secretary of the Treasury, foreign central banks, foreign monetary authorities, foreign governments, and certain international organizations; and any other entities authorized by a Federal Reserve Bank to use Fedwire Funds or Security Services. See Appendix E for a discussion of the Federal Reserve Board's PSR Policy. Certain payment and securities settlement systems, such as CHIPS and CLS, also rely upon Fedwire Funds Service to allow participants or their correspondents to provide necessary funding.CHIPS and CLS also use Fedwire Funds Service for settlement services by establishing zero-balance settlement accounts to settle clearinghouse participant obligations. The Federal Reserve Bank requires participants in a net debit position to make a Fedwire Funds Service funds transfer payment to the settlement account. It then pays participants in a net credit position by means of a Fedwire Funds Service funds transfer from that settlement account. Once the Federal Reserve Bank processes these funds transfers, they are final and irrevocable.
Financial institutions sending a Fedwire Funds Service payment order irrevocably authorize their Federal Reserve Bank to debit (charge) their Federal Reserve account for the transfer amount and to give credit in the same amount to the payee. Only the originating financial institution can have funds removed from its Federal Reserve account using the Fedwire Funds Service. Depository institutions that maintain a reserve or clearing account with a Federal Reserve Bank may use Fedwire Funds Service to send payments to, or receive payments from, other account holders directly. Once the Federal Reserve Bank credits the receiving institution's account, it will not reverse the transaction at the request of the originating institution.
Financial institutions may access the Fedwire Funds Service via high-speed direct computer interface (CI), FedLine, or with off-line telephone connectivity with a Federal Reserve Bank. Financial institutions may also access certain Fedwire Funds Service inquiry information via FedLine for the Web.By year-end 2004, customers should be able to initiate Fedwire Funds Service and Fedwire Securities Service transactions through the web via FedLine Advantage. On-line participants, using either a CI or FedLine PC connection to Fedwire Funds Service, require no manual processing by the Federal Reserve Banks. Off-line participants provide funds transfer instructions to one of two Federal Reserve Bank customer support sites by telephone, and after authenticating the participant, the Federal Reserve Bank enters the transfer instruction into the Fedwire Funds Service system for execution. The manual processing required for off-line requests makes them more costly and suitable only for institutions processing a small number of funds transfer payment orders.
The Federal Reserve Bank's FedLine for the Web currently offers access to low-risk Federal Reserve Bank financial services. FedLine Advantage, which should begin a graduated rollout by year-end 2004, will allow depository institutions access to additional Federal Reserve financial services, including the Fedwire Funds Services and the Fedwire Securities Service, via a secure Internet Protocol (IP) gateway to Federal Reserve Bank financial services. Residing on a secure Web server, FedLine Advantage will be accessible to customer financial institutions with authenticated credentials using digital certificates.
Fedwire and Clearing House Interbank Payments System (CHIPS)