Search Results
Journal Article
The timing and funding of Fedwire funds transfers
An examination of the Federal Reserve?s Fedwire Funds Transfer service reveals that the highest concentration of funds-transfer value occurs in the late afternoon. The authors attribute this activity peak to attempts by banks (and their customers) to coordinate payment timing more closely. By synchronizing payments, banks can take advantage of incoming funds to make outgoing payments?especially during periods of heavy payment traffic. Conversely, during off-peak times, banks must rely more on account balances or overdrafts to fund payments, which increases the cost of making payments. For ...
Journal Article
Liquidity effects of the events of September 11, 2001
Banks rely heavily on incoming payments from other banks to fund their own payments. The terrorist attacks of September 11, 2001, destroyed facilities in Lower Manhattan, leaving some banks unable to send payments through the Federal Reserve's Fedwire payments system. As a result, many banks received fewer payments than expected, causing unexpected shortfalls in banks' liquidity. These disruptions also made it harder for banks to redistribute balances across the banking system in a timely manner. In this article, the authors measure the payments responses of banks to the receipt of payments ...
Report
The topology of interbank payment flows
We explore the network topology of the interbank payments transferred between commercial banks over the Fedwire Funds Service. We find that the network is compact despite low connectivity. The network includes a tightly connected core of money-center banks to which all other banks connect. The degree distribution is scale-free over a substantial range. We find that the properties of the network changed considerably in the immediate aftermath of the attacks of September 11, 2001.
Conference Paper
Developments in the dollar payments system
Report
The payment system benefits of high reserve balances
The policy measures taken since the financial crisis have greatly expanded the size of the Federal Reserve?s balance sheet and have thus raised the level of aggregate bank reserves as well. Over the same period there has been a significant shift in the timing of payments made over the Federal Reserve?s Fedwire Funds Service toward earlier settlement. This paper documents this timing change and presents regression results suggesting that the increase in overall reserve balances explains the vast majority of this development. The paper also discusses the benefits of high aggregate reserve ...
Report
Evaluating the quality of fed funds lending estimates produced from Fedwire payments data
A number of empirical analyses of interbank lending rely on indirect inferences from individual interbank transactions extracted from payments data using algorithms. In this paper, we conduct an evaluation to assess the ability of identifying overnight U.S. fed funds activity from Fedwire payments data. We find evidence that the estimates extracted from the data are statistically significantly correlated with banks' fed funds borrowing as reported on the FRY-9C. We find similar associations for fed funds lending, although the correlations are lower. To be conservative, we believe that the ...
Conference Paper
Payment risk, network risk, and the role of the Fed
Journal Article
Changes in the timing distribution of Fedwire funds transfers
The Federal Reserve's Fedwire funds transfer service - the biggest large-value payments system in the United States - has long displayed a peak of activity in the late afternoon. Theory suggests that the concentration of late-afternoon Fedwire activity reflects coordination among participating banks to reduce liquidity costs, delay costs, and credit risk; as these costs and risk change over time, payment timing most likely will be affected. This article seeks to quantify how the changing environment in which Fedwire operates has affected the timing of payment value transferred within the ...
Journal Article
Future Fedline version promises faster service