The Fed’s system that enables banks to ship cash backwards and forwards went down for a number of hours
The Federal Reserve’s system, which allows financial institutions to send money back and forth electronically, went off for several hours on Wednesday but appeared to come back online later that afternoon.
The “operational flaw” as described by the Fed affected several services, including the centralized automated clearinghouse system that connects custodians and related institutions that send electronic credit and debt transfers.
There were no early indications that a foul was suspected.
In addition to the Fed ACH service, Check 21, FedCash, Fedwire and the national settlement service were also affected.
A statement from the central bank said it became aware of a problem around 11:15 a.m. ET. A person at a Wall Street bank said the Fedwire and ACH systems appear to come back online around 2:45 p.m. ET.
“The Fedwire Funds Service, the Fedwire Securities Service, and the National Settlement Service have resumed processing and are operating normally,” the Fed said around the same time.
The statement also noted that the mishap had an impact on payment deadlines, and the Fed said “will notify our customers of remediation efforts as they become available”.
No further information was available.
The list of affected services: Account Services, Central Bank, Check 21, Check Adjustments, FedACH, FedCash, FedLine Advantage, FedLine Command, FedLine Direct, FedLine Web, Fedwire Funds, Fedwire Securities, and National Settlement.
The outage came the same week that Fed Chairman Jerome Powell spoke to Capitol Hill lawmakers about the central bank’s advances in its consumer-centric payments system and efforts to develop a “digital dollar”.
Powell said this was “an important year” for the program to develop.
“It’s going to be a fairly active year of engaging with the public,” the central bank chief said during a House committee hearing.
The Fed has been developing a digital payment system for several years, which, among other things, is intended to give people without bank details better access to payment systems.
Powell did not provide details, but noted that the Fed may need official approval to proceed with its plans.
“We might need legislative approval for something like this,” he said.
Failures, especially with the ACH system, can have far-reaching effects. The system manages direct deposits of payrolls, social security and income tax refunds, and automatic payments for mortgages and utility bills.
FedCash sells currencies and coins that have been in short supply since the outbreak of the Covid-19 pandemic. FedWire is a billing service, while FedLine offers alternative services to the ACH system.