The Federal Reserve Bank of New York today released Changes in the Timing Distribution of Fedwire Funds Transfers—a new forthcoming article in its Economic Policy Review.
Authors Olivier Armantier, Jeffrey Arnold, and James McAndrews examine the changing timing of the flow of payments on Fedwire, the Federal Reserve’s large-value payments system. They find several changes in the time at which payments are made over the last decade.
In particular, while Fedwire activity historically has peaked in the late afternoon, the authors find that the peaks of payment value have become even more concentrated and occur later in the day.They note that a higher concentration of payments at the end of the day increases the potential magnitude of any problems that might result from operational disruptions in the payments system.
Armantier, Arnold, and McAndrews also investigate possible factors that could explainthe timing of payments on Fedwire. They find that changes in Federal Reserve System policies that govern the provision of daylight overdrafts had significant effects on timing. In addition, changes in the value and volume of payments affect timing. Finally, payment timing trends on Fedwire are also associated with changes in the flow of payments from private sector settlement institutions.
The authors conclude that while no specific evidence of increased operational risk in the payments system has been identified, it is clear that Fedwire and the private sector settlement institutions are highly interdependent and that further research on a number of related topics is needed.
Olivier Armantier is a senior economist and James McAndrews a senior vice president at the Federal Reserve Bank of New York. Jeffrey Arnold was a research associate at the Bank when this article was written.