Financial Services

Federal Reserve System

Main Function:

The Federal Reserve Bank is serving like a bank for the banks. It provides financial services for depository institution, such as banks, credit unions, and savings and loans. The services include electronically transferring funds, collecting checks, and distributing and receiving cash and coin.

Electronic Payment Services:

Automated Clearinghouse (ACH)

An electronic payment network which allows depository institutions to send each other electronic credit and debit transfers.
Some examples are Social Security payments, insurance premium payments, and utility payments.

A large-dollar electronic payment system owned and operated by the Federal Reserve Banks that transfers funds between financial institutions. Participants typically have to transfer large dollar and time-critical payments. Most transactions are done online and completed in seconds.

Check Collection

The Federal Reserve System operates a nationwide check clearing system that processes checks, drafts and similar items. A depository institution would send the deposits of checks, which is drawn on other institutions, to a Federal Reserve Bank for collection. The value of the collected checks will be credited and deposited to the accounts of the collecting institutions and will be debited from the accounts of the paying institutions. Most checks are collected and settled within one business day.

Cash and Coin

The Fed makes sure there is enough money in circulation. Reserve Bank offices maintain cash and coin processing operations to accept deposits and distribute cash and coin to financial institutions. While depositing in the Federal Reserve, the notes that are suspected of being counterfeit are separated from the rest and forwarded to the Secret Service, and the notes that are too worn for re-circulation are destroyed and replaced by new ones from the Bureau of Engraving and Printing of the Department of the Treasury, which designed and printed them.

A Bank for the Government

The Federal Reserve is also served as a fiscal agent and depository for the government. It performs several services for the U.S, Treasury including: maintaining accounts, processing government checks, postal money orders and U.S. savings bonds, and collecting federal tax deposits.
The Federal Reserve Banks issue, service, and redeem tens of millions of U.S. savings bonds, which are contracts evidencing a loan made to the United States, each year on behalf of the Treasury.