Magazine article American Banker

Fedwire Charges Trimmed -- for Big Users Only

Magazine article American Banker

Fedwire Charges Trimmed -- for Big Users Only

Article excerpt

The Federal Reserve, which this year skipped its now traditional January cut in Fedwire prices, on Monday announced its first midyear cut ever -- but, in another first, only for the biggest customers.

Starting Aug. 1, institutions with more than 80,000 Fedwire originations per month will pay a penny less -- 16 cents per transaction rather than 17 cents.

Since 1996 the Fed had lowered online transfer fees almost 60% through January cuts announced the preceding fall. This was the first year since 1996 without such a cut.

Surprisingly robust volumes and lower operating costs prompted the move, said Dara Hunt, a senior vice president of the Federal Reserve Bank of New York who is the product manager of the Fed's Wholesale Payments Product Office. "Going into this year, we didn't know if we could reduce fees," she said.

By law, the Fed must earn enough to recover its costs while remaining competitive with the private sector. "Our projections didn't give us a whole lot of headroom, but they turned out to be somewhat conservative," Ms. Hunt said.

Fedwire is a high-speed electronic payment system that is owned and operated by the Federal Reserve banks. Payments are initiated, processed, and settled individually and immediately upon receipt; once processed by the reserve banks, Fedwire payments are final and irrevocable.

Since the mid-1990s the Fed had slashed fees across the board, from 53 cents in 1995 to just more than 22 cents on average last year.

Monday's announcement is in keeping with a trend of declining prices for electronic services, said Michael Herd, the director of public relations for Nacha, the rulemaking body governing automated clearing house and other electronic transactions. …

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