Magazine article American Banker

Fed Wire to Lengthen Its Hours in Move to Real Time Settlement

Magazine article American Banker

Fed Wire to Lengthen Its Hours in Move to Real Time Settlement

Article excerpt

WASHINGTON - In a move likely to cause big operational headaches for banks, the Federal Reserve on Wednesday voted to vastly expand the hours of its Fed Wire funds transfer service.

Starting in 1997, the electronic funds wire will open at 12:30 a.m. eastern time and close at 6:30 p.m. That's eight hours longer than it is currently open, and six hours longer than the Fed proposed in October 1992.

To accomodate the longer hours, banks will be forced to beef up their round-the-clock personnel and modify their operational systems, industry officials said. And the down-time for banks to settle their accounts before opening for the following day will narrow to six hours, leaving them vulnerable to unexpected glitches.

"This gives a whole new meaning to the term bankers' hours," said Kawika Daguio, who tracks the issue for the American Bankers Association.

Fed officials said the move was needed to minimize settlement and systemic risks in the financial system and to encourage banks to develop new ways of speeding up the settlement of foreign exchange contracts.

In addition, they said, it would make a statement that the central bank is on the forefront of moving toward real-time settlement in 24-hour financial markets.

"The anachronism of a single day ending at a single point of time is rapidly running into problems," said Fed chairman Alan Greenspan. "This 18-hour issue moves us fairly significantly forward in this regard."

Fed officials were unanimous in their vote to extend the funds transfer hours. Consideration of the measure was expedited so the board could consider it on the last day of governorship for Wayne D. Angell, the board's point-man on payments system issues.

Accommodating Early Markets

Fed officials also decided Wednesday to leave unchanged the operating hours of the Fedwire securities transfer service, at least for now. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.