Fed Reserve Process


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Federal Reserve Process : 

Federal Reserve Process


INTRODUCTION The Federal Reserve System is the central bank of United States. It was founded by congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded. Most development countries have a central bank whose functions are broadly similar to those of the Federal Reserve. The federal reserve must work within the framework of the overall objectives of economic and financial policy established by the government, one of the 12 operating arms of the federal reserve System, located through-out the nation, that together with their 25 branches carry out various system functions. Including operating a nationwide payments system, distributing the nation’s currency and coin, supervising and regulating members banks and bank holding companies and serving as banker for the US treasury.


FUNCTIONS OF FEDERAL RESERVE Conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment , stable prices, and moderate long term interest rates. Supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers. Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets. Providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system. The federal reserve operates a nationwide check-clearing system.


FED RECONCILIATION Reconciliation of various bank transaction viz. Cash Letters, Return items, ACH, Savings Bond, Securities, Check Adjustment, Wires and Vault transaction between Chase General Ledger and the Federal Reserve. www.fedwiredirectory.frb.org


FED RECONCILIATION PROCESS CASH LETTERS Cash letters are bundle of checks, which goes to Routing machine and sorted by ABA #. These CL are Processed by Item Processing Dept. Incoming CL are Checks Drawn on Chase Customer being sent by to Chase trough the Federal Reserve system. Outgoing CL are checks that come into chase and processed by IP Dept. IP dept. Debit or Credit the Fed Account using SAP system. They are sorted by ABA # (routing #) and sent out to the various banks or to the FRB


FED RECONCILIATION PROCESS CASH LETTER FRB uses the 5 Digit fed class code to identify the type of work. Fed gives credit over two or more days on same outgoing CL. They have to sort them based on routing # and forward them to other banks . CL are going to Paper CL to Image CL and sent electronically to the fed for Credit or Debit. The Auto Match Will run Once all the GL flow into Recon-Plus. We Match all the CL based on Certain Matching Criteria . Change the Name 2 to REZ for all Open CL >$1,000.00 and Change the Name 2 to VPZ for all Open Image CL.


FED RECONCILIATION PROCESS RETURNS Returns are Checks that are Being returned because the Accounts the are Drawn on have Insufficient Funds in the Accounts. The Incoming Returns are Return Checks being Returned by other banks through federal Reserve System to Chase. The Outgoing Returns are Return Checks being sent by Chase through the Federal Reserve System to Other Banks. Two Return Dept. are JPMorgan Chase are in Texas and Indiana. We Match all the Return Items based on Certain Matching Criteria


FED RECONCILIATION PROCESS ACH The Automated Clearing House (ACH) is a U.S.-based electronic funds transfer system Exchange of payments between banks and Federal Reserve Bank (FRB) or private Clearing Houses Nearly all commercial banks can process and receive ACH transactions Can be used to collect (ACH debits) or disburse (ACH credits) funds ACH is a less expensive payment option for businesses than checks, wires or credit cards ACH provides faster processing than paper checks, which must be physically handled, and experiences minimal fraud


FED RECONCILIATION PROCESS SAVINGS BOND: The bank deals with EE Savings bond, the customer come into a chase branch to purchase EE bonds. The U.S. Treasury’s Bureau of the Public Debt and the Federal Reserve’s Treasury Retail Securities Sites, located in Minneapolis and Pittsburgh, administer the program in partnership with financial institutions, which serve as savings bond agents. Treasury Retail Securities Sites and U.S. Treasury’s Bureau of the Public Debt offer a variety of automated services that make issuing and redeeming savings bonds both flexible and convenient for financial institutions. Series EE and I savings bonds are purchased through the Treasury Retail Securities Sites.


FED RECONCILIATION PROCESS Cash Letter ADJ - Research ADJ Sweep – The research department gets a daily file from for all the debit and credit adjustments being made for day by the Federal Reserve to JPMC, along with the individual dollar amounts there are "fed advice information" sent by the Fed ... so that research can process the adjustments. If research has the adjustment information on day one... they send the items to FSW to process... on Second day they usually get the information why they were missing on day one ... and they send those items to FSW to process. depending on the information the FSW either debits or credits the Fed accounts.


FED RECONCILIATION PROCESS Respondent Activity – Respondent activity means - There are some small banks which cannot directly transact with Fed these are smaller banks in United States that do not have there own Fed account so they go thru a larger bank (JPMC bank OH, TX, IL, IN) for their Federal reserve related activities. Fed rejects – Rejects on recon plus are caused mainly because a respondent bank has new Fed activity and the recon-plus tech group has not updated the database with the new ABA numbers in recon-plus . So these activities generally do not have information on Cost center , Branch Code and some times customer account number .




ACCOUNT ACTIVITIES Accounts are reconciled on daily basis using Recon Plus Tool. Sub accounts are used to clear cash letters, returns, ach, savings bonds, check adjustment, cash adjustment (straps) and cash vault with the federal reserve bank. Fed transactions received via fed transmission are sorted by fed cost center

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