Federal Reserve Bank Services

As a "banker’s bank," the Federal Reserve System provides services to commercial banks and other depository institutions much like those that institutions offer to their customers—dispensing cash, transferring funds, and accepting and safeguarding deposits.

Currency and Coin

An important function of the Federal Reserve System is ensuring that enough currency and coin are in circulation to meet the public’s demand. Coins are created at U.S. Mints; paper money is printed by the Bureau of Engraving and Printing. Supplies are then shipped to Federal Reserve Banks, where the money is stored. When people need additional cash, such as during the holidays, commercial banks order more coin and currency from their Federal Reserve Bank and pay for it by drawing down their reserve balances.

The additional cash put into circulation is eventually returned to depository institutions by merchants and other business owners. To reduce the excess currency and coin held in their vaults, depository institutions return the excess to their regional Reserve Bank, where it is credited to their accounts. Soiled and worn-out notes are destroyed; counterfeit notes are sent to the Secret Service; and worn, bent and foreign coins are removed. Reusable coins and notes are then stored at the Reserve Bank until needed.

Check Processing

The Federal Reserve helps financial institutions collect the checks they receive. High-speed, computer-controlled machines at Reserve Banks sort checks, total the amounts, credit the depositing institution and charge the institution on which the checks are drawn. The numbers printed in magnetic ink on the bottom of the checks tell the Fed’s computers which banks to debit.

Automated Clearinghouse (ACH)

The Federal Reserve has helped create and operate an automated clearinghouse (ACH) system to handle electronic payments instead of paper. Financial institutions, businesses and the U.S. Treasury can cut down on paperwork by offering consumers such services as direct deposit and bill payment.

Fedwire

For larger transactions, debits and credits are usually transferred electronically through Fedwire, a highly sophisticated, computerized communications network that transfers funds almost instantly from one depository institution to another anywhere in the country.

Services to the U.S. Treasury

As the federal government’s bank, the Federal Reserve performs several services for the U.S. Treasury:

• Maintains the Treasury’s funds account
• Clears Treasury checks drawn on that account
• Conducts nationwide auctions of Treasury securities
• Issues, services and redeems Treasury securities

International Services

As the central bank of the United States, the Federal Reserve performs services for foreign central banks and for international organizations, such as the International Monetary Fund.

• Safekeeping of gold for foreign official institutions
• Buying or selling foreign currencies in exchange for U.S. dollars
• Maintaining accounts for foreign institutions and international organizations

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