Depository Institution Services

Currency and Coin — The Federal Reserve Banks distribute cur­rency (paper money) and coin to depository institutions to meet the public’s need for cash. During periods of heavy cash demand, such as the Christmas season, institutions obtain larger amounts of cash from the Federal Reserve Banks. When public demand for cash is light, in­stitutions deposit excess cash with the Reserve Banks, for credit to their reserve accounts. Currency and coin received at the Federal Re­serve Banks are sorted and counted. Unfit currency and coin are de­stroyed and replaced with new currency and coin obtained from the Treasury Department’s Bureau of Engraving and Printing and Bureau of the Mint.

Check Processing — The Federal Reserve serves as a central check-clearing system, handling approximately 18 billion checks a year. Using high-speed sorting machines, the Federal Reserve Banks process these checks, route them to the depository institutions on which they are written, and transfer payment for the checks through accounts that depository institutions maintain with the Federal Re­serve Banks.

Wire Transfers — The Federal Reserve Banks and about 7,800 de­pository institutions are linked electronically through the Federal Re­serve Communications System, a network through which depository institutions can transfer funds and securities nationwide in a matter of minutes.

Automated Clearinghouses — Federal Reserve Banks and their Branches operate automated clearinghouses, computerized facilities that allow for the electronic exchange of payments among participat­ing depository institutions. Automated clearinghouses are used pri­marily to effect recurring transactions, such as direct deposit of pay­rolls and payment of mortgages, and serve as a replacement for checks. The Treasury Department uses automated clearinghouses ex­tensively to make social security, payroll, and vendor payments.