Central Banker’s Hours: The Fed’s Tortuous, Slow Road to Faster Payments

On May 9th, the Federal Reserve System announced that it was "seeking input" on a proposal to expand the operating hours of two "wholesale" payment services it operates, Fedwire Funds Service (henceforth "Fedwire") and the National Settlement Service (NSS). Wholesale payment services are responsible for transferring direct liabilities of central banks between financial institutions, particularly, in value terms, for the settlement of interbank dues. At present Fedwire and the NSS only transfer funds on weekdays, excluding holidays. The proposed expansion would have them run 22 hours a day, seven days a week, holidays included. This proposed reform has been long in the making, for the potential gains from weekend and holiday Fedwire and NSS hours have been recognized for many years not only by financial industry, non-financial business, and consumer representatives, but by Federal Reserve officials themselves. This paper explains those potential gains. It then surveys the Fed's repeated postponement, over the course of almost a decade, of plans to provide for weekend and holiday Fedwire and NSS operating hours, arguing that in delaying for so long the Fed has neglected its duty, as the United States' monopoly provider of wholesale settlement services, to adapt those services to changing needs. The paper concludes by urging Fed officials to proceed at last, as rapidly as possible, with the Fedwire and NSS hours expansion plan they first promised to work toward years ago.