Fostering Payment and Settlement System Safety and Efficiency.pdf

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The Federal Reserve works to promote a safe, efficient, and accessible system for U.S. dollar transactions.6Overview of Key Federal Reserve Payment System Functions 120Providing Services to Banks and the Federal Government 121The U .S . Payment System Today and Reserve Bank Services 122Regulating and Supervising the Payment System 142Providing Vital Banking System Liquidity 146Exploring and Implementing Payment System Improvements 148FunctionFostering Payment and Settlement System Safety and Efficiency
The Federal Reserve System Purposes & Functions 119n efficient, effective, and safe U.S. and global payment and settle-ment system is vital to the U.S. economy, and the Federal Reserve plays an important role in helping maintain that system’s integrity.The U.S. dollar payment and settlement system is composed of payment instruments and methods, systems, and institutions that have changed over time. The Federal Reserve provides currency and operates some ele-ments of this system. This system facilitates financial transactions and purchases of goods and services and the attendant movement of money at all levels of the U.S. economy—on behalf of individuals and institutions, buyers and sellers, consumers and businesses, investors and securities issuers—and sup-ports interactions between the U.S. economy and others around the world. The importance of the payment system and a sound currency in our daily lives and interactions makes its safe and proper functioning es-sential to the health of the U.S. financial system and overall economy.AFigure 6.1. The Federal Reserve’s role in everyday transactionsWhether you’re paying your babysitter, shopping for groceries, or getting your paycheck, you’re operating within the payment system. The Federal Reserve plays an important role in maintaining that system’s integrity.WHOLESALE PAYMENTSServices like the Federal Reserve’s FedwireFundsand Fedwire Securitiesservices help to process large-value financial transactions among businesses, banks, and individuals.Customer A’sbankCustomer B’sbankBusiness withpayroll paymentEmployeesAUTOMATEDCLEARINGHOUSE (ACH)The Federal Reserve plays a key role in processing small-value electronic credit or debit transfers, such as direct deposits of payroll or recurring bill payments.CURRENCYThe Federal Reserve Board issues papercurrency (Federal Reserve notes). FederalReserve Banks ensure adequate supply ofpaper currency around the country.Parent with cashBabysitterCHECKSFederal Reserve Banks collect checksdeposited by banks and return unpaidchecks to the bank on whichthe check is drawn.Homeownerwith checkPlumber
120 Fostering Payment and Settlement System Safety and EfficiencyOverview of Key Federal Reserve Payment System FunctionsThe Federal Reserve performs several key functions to maintain the integrity of the payment system. These functions help keep cash, check, and electronic transactions moving reliably through the U.S. economy

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