Fedwire

DEFINITION of 'Fedwire'

A real-time gross settlement system (RTGS) of central bank money used in the United States by its Federal Reserve Banks to settle final payments in U.S. dollars electronically between its member institutions.

Owned and operated by the 12 Federal Reserve Banks, the Fedwire is a networked system for payment processing between the member banks themselves, or other Fedwire member participants. Members can consist of depository financial institutions in the United States, as well as U.S. branches of certain foreign banks or government groups, provided that they maintain an account with a Federal Reserve Bank.

BREAKING DOWN 'Fedwire'

While the Fedwire is not managed for a profit, law does mandate the Fedwire charge fees for use of the service in order to recoup costs. Both participants in a given transaction will pay a small fee.

The Fedwire system processes trillions of dollars daily, and it includes an overdraft system covers participants with existing and approved accounts. It has been in operation in some format for nearly 100 years, and as such, the Fedwire system is designed to be highly reliable. It often processes high dollar values, and critical recurring payments domestically and abroad.

RELATED TERMS
  1. Clearing House Interbank Payments ...

    The primary clearing house in the U.S. for large banking transactions. ...
  2. Private Sector Adjustment Factor ...

    A method used by the Federal Reserve Board for calculating the ...
  3. Overdraft Cap

    The maximum dollar limit that a bank will send to another financial ...
  4. Euro Feds

    A federal wire transmission advancing funds in Eurodollars from ...
  5. Regulation J

    A regulation set forth by the Federal Reserve. Regulation J establishes ...
  6. Bilateral Credit Limit

    Intraday credit limits set by two institutions for use with one ...
Related Articles
  1. Economics

    Inside National Payment Systems

    Investopedia explains: The global interconnection of U.S. payment systems makes commerical and financial transfers possible.
  2. Economics

    What Do the Federal Reserve Banks Do?

    These 12 regional banks are involved with four general tasks: formulate monetary policy, supervise financial institutions, facilitate government policy and provide payment services.
  3. Personal Finance

    The Banking System: Federal Reserve System

    ByStephen D. Simpson, CFA The central bank of the United States is the Federal Reserve System. The Federal Reserve System came into being in 1913, after the passage of the Federal Reserve Act ...
  4. Economics

    Regional Banks Give The Fed A National Perspective

    We all know that the Federal Reserve utilizes monetary policy to control the economy, but what do the 12 regional Federal Reserve Banks do?
  5. Economics

    Explaining the Federal Reserve System

    The Federal Reserve System is the central bank of the United States. It regulates monetary policy and supervises the nation’s banking system.
  6. Economics

    The Federal Reserve: What Is The Fed?

    The Federal Reserve was created by the U.S. Congress in 1913. Before that, the U.S. lacked any formal organization for studying and implementing monetary policy. Consequently markets were often ...
  7. Economics

    What Does a Central Bank Do?

    A central bank oversees a nation’s monetary system.
  8. Economics

    What's the 1913 Federal Reserve Act?

    The 1913 Federal Reserve Act was a pivotal congressional act that helped establish the Federal Reserve System as it exists today. It is one of the United States financial system’s most influential ...
  9. Economics

    The Federal Reserve: Duties

    The Fed's mandate is "to promote sustainable growth, high levels of employment, stability of prices to help preserve the purchasing power of the dollar and moderate long-term interest rates."In ...
  10. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
RELATED FAQS
  1. How does the Private Sector Adjustment Factor (PSAF) affect competition in the private-sector?

    Look at a simple breakdown of the Private Sector Adjustment Factor (PSAF), set by the Federal Reserve to recover imputed ... Read Answer >>
  2. What is the structure of the U.S. Federal Reserve Bank?

    Wonder how the U.S. Federal Bank began and how it works today? Learn how this complex system is structured and how it works ... Read Answer >>
  3. What do banks do to control the bank reserve?

    Understand what the Federal Reserve does in order to expand or contract the economy. Learn what depository institutions can ... Read Answer >>
  4. Who determines the reserve ratio?

    Understand what the Federal Reserve is and what it regulates in the U.S. economy. Learn about the reserve ratio and how the ... Read Answer >>
  5. How are bank reserve requirements determined and how does this affect shareholders?

    Learn how bank reserve requirements are determined and how bank reserves affect shareholders through improved bank stability ... Read Answer >>
  6. How is the Federal Reserve audited?

    Learn how the Federal Reserve gets audited. Due to gridlock, the Federal Reserve has been forced to take on the role of stimulating ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center