1. The formation of the U.S. banking system
2. The U.S. banking system and the principles of its construction
Banking in the United States is governed by numerous laws. In addition to those already mentioned, banking has been greatly influenced by: The Real Interest Rate and Easy Understand Loan Terms Act; The Real Interest Rate and Easy Understand Loan Terms Simplification and Reform Act; The Bank Merger Act of 1960; The Banking Secrecy Act.
In the United States, a bank is any entity that performs one or all of the following operations: receiving, encashing, transferring, paying, lending, investing, investing, exchanging, and servicing (safekeeping, trust management, agency representation, custody) money and applications for money both domestically and internationally.
3. U.S. Federal Reserve System
4. Structure of bank resources
From the position of resource base formation all financial institutions are made into two categories: deposit and non-deposit institutions.
4.1 Depository institutions
4.2 Non-depository institutions
(I won’t dwell on non-deposit institutes, I’ll just list them.)
Life insurance companies Investment companies Financial companies Mortgage companies
4.3 Structure and functions of bank deposit accounts
Raised funds are the core business of all financial institutions and they compete fiercely in the money and capital markets. Deregulation in the US financial sector since the 1980s has provided all financial institutions with an almost equal competitive playing field. The monetary resources of firms and individuals can be divided into two large groups: Funds earmarked for current spending; Reserves and savings, temporarily free funds.
If the first group, mainly intended for settlements and payments in constant turnover, the second one mainly forms the sources of active operations of banks and non-banking financial institutions.
Deposit Institutions offers corporate and individual customers a wide variety of accounts: Checks; Money Market; Term Certificates of Deposit; Super Nu; ATM Card Accounts; Safe Deposit Boxes; Secure Credit Cards; ATS (Automated Savings Transfers); Direct Deposit; Telegraph Transfer; With Courier Service; [email protected]
5. Interbank settlement systems
ABA Routing Number, always containing 9 digits, arranged in a certain order and a certain format, introduced in 1911 by the American Bankers Association. Since then, each financial institution has had its own routing number, which is the unique identifier of the financial entity.
Federal Reserver Routing Symbol The first four digits of the Federal Reserve office identifier. The first two digits of the Federal Reserve district routing number indicate where the Federal Reserva office serving financial institution is located geographically. These digits can only take the values below: 01 Boston, 02 New York, 03 Philadelphia, 04 Cleveland, 05 Richmond, 06 Atlanta, 07 Chicago, 08 St. Louis, 09 Minneapolis, 10 Kansas City, 11 Dallas, 12 San Francisco. Simply put, the third number denotes a specific Federal Reserve office. The fourth speaks to the geographic location of that institution within that Federal Reserve district.
ABA Institution Identifier identifier of a financial institution is four following digits. Each financial institution, according to certain rules and depending on many parameters of that institution, is assigned its unique identifier consisting of 4 digits.
Check Digit is the last digit of the Routing Numbera checksum that verifies the correctness of the number. Always present as part of the Routing Number.
CHIPS New York International Clearing House Payment System
CHIPS began operations in 1970. The creation of an electronic network of New York banks was necessitated by the need to account for the rapidly increasing volume of settlement of international transactions. Because it was difficult to carry out all settlements in a single center, CHIPS was developed as a decentralized system. The 12 largest banks were selected among all participating banks to carry out settlements among all other banks. Banks with a capital of at least 250 mln US dollars are eligible to participate in CHIPS. All participants of CHIPS must have branches in New York, connected to the computers of settlement banks. The CHIPS system has significant differences from other systems. The point is that interbank liabilities and claims are not settled by it immediately upon issuing relevant documents in the form of electronic messages, but are accumulated during the business day, at the end of which the balance is drawn up. Final payments are made by settlement banks by transferring funds in reserve accounts at the Federal Reserve Bank of New York over the Fed-Wire network.
FedWire (popularly just Vaer ) is the U.S. Federal Reserve’s network.
Fedwire is an electronic money and securities transmission network linking 12 federal reserve banks to more than 11,000 depository institutions with reserve or clearing accounts with the Federal Reserve System. The principle behind the Federal Reserve’s electronic settlement system stems from the very structure of the U.S. Federal Reserve. Each bank participates in the system through its regional federal reserve bank. Acting on its own behalf or on behalf of its client, one bank simply moves some funds from its reserve account to the reserve account of the beneficiary bank, the latter accepts it on its own behalf or on behalf of the beneficiary (depending on to whom the payment is addressed). At the bank level, the payment is almost instantaneous – one bank’s reserve account is debited and the other’s is credited. Each Federal Reserve Bank maintains a regional computer network and balances payments and transfers of banks within its region. If a payment is addressed to a financial institution in another region, the payer’s reserve bank contacts the payee’s reserve bank through a central processor in Culpepper.
Each of the participants in the Fed’s settlement system serves all of the lower levels. The main link, however, is the movement of funds in the banks’ reserve accounts. In fact, the system assumes responsibility only for the movement of funds in and between the federal reserve banks, i.e., the first and second tier networks. The banks themselves are responsible for computer communication of the participating banks with their customers. The payment is considered completed when the funds are transferred to the recipient bank’s reserve account; it cannot be revoked.
Automated Clearing House – The Automated Clearing House settles computer-based clearing and settlement systems for electronic transactions between depository institutions that are part of the system. These electronic transactions are legally absolutely equivalent to the paper check transactions used for regular payments, such as payroll or insurance payments.
Used by virtually all banks located in the United States. The acquiring bank must use ACH to send money to the merchant’s checking account. Each transaction, such as a withdrawal from the buyer’s account, takes approximately 48 hours. It is currently possible to revoke a payment on a ford transaction.
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