"In terms of clearing, our Georgia Bankers Association has the Georgia Clearing House. Clearing will be conducted every 20 days, and then the remaining ten days will be used for corresponding settlement."

"However, most of our settlement amounts are not high, so we rarely use the Federal Reserve's settlement services."

"Wait a minute, Goodman, are you saying that we can use the Federal Reserve Settlement Service even if we are not a member bank of the Federal Reserve System? Have we used it before?"

Rarely used and not used are completely different things! Hearing what Goodman meant, Carter quickly raised his hand to ask...

"We can't use it directly, but we can use it indirectly. Abrams Bank in Macon is a member bank of the Federal Reserve System. In the past, when we needed to settle large amounts, we would ask for their help.

Dry language is never easier to understand than simple and intuitive images. Goodman obviously knew this very well. While he was talking, he took the pen and paper on the table and began to draw a logic map for Carter.

"Let's assume a scenario. Now we have a customer who deposited 1 million US dollars in our Black Bank. Now he wants to transfer the money to any bank, let's say it is Bank X in Maryland. At this time,

Neither our bank nor bank

I’m so busy that I’m in a panic.”

Goodman drew boxes representing the two banks on the paper in front of him and continued:

"You can't do that, so what would we normally do? We would first send a transaction request to Abrams Bank for $1 million, and at that time the $1 million is actually still in our bank."

There is now a box representing Abrams Bank on top of the box representing Black Bank, and a straight line points to it:

"Abrams Bank, which received our transaction request, knows the person we want to eventually transfer to, bank

The transaction request goes to a Federal Reserve System member bank near bank x, that is, a bank that can use the fedwire system, assuming bank z.

At this time, a large circle representing fedwire appeared in the middle of four boxes on both sides. "You know that all member banks of the Federal Reserve System have a reserve account within the Federal Reserve System, right? If Abrams's reserve account is in

It doesn't matter if there is a balance of one million, or a little less, the transaction will be completed. The fedwire system will transfer the money in the Abrams Bank reserve account to Z Bank in real time, and then Z Bank will transfer the money.

The money will be transferred to the account of bank x.”

"In this process, we are the issuing bank, that is, we are the starting point for initiating the transaction, and the acquiring bank is x bank, and they are the bank that ultimately receives the $1 million payment. Abrams Bank and z bank

The intermediary bank is responsible for helping us transfer funds. The Federal Reserve is the largest settlement institution and helps both parties complete clearing and settlement."

"But it's not over yet. The US$1 million is still in our bank account. But at this time, Abrams Bank has actually reduced the amount by US$1 million, so at this time, we have a debt.

Abrams Bank $1 million in debt.”

"This debt will be cleared by the Georgia Interbank Clearing House on the settlement day and will urge settlement. That is, on this day, we need to confirm the debt and transfer the $1 million in our bank to Abra

This completes the entire fund transfer process.

"I understand. In other words, if we can now use the settlement services provided by the Federal Reserve, we can greatly save these intermediary procedures and handling fees, right?"

After figuring out this operational process, Carter immediately understood the convenience of this regulation. A transfer involves two intermediary banks and three settlement institutions (the Federal Reserve, the clearing house where the issuing bank is located, and the clearing house where the acquiring bank is located).

The handling fees alone were charged five times! In addition to the handling fees of the acquiring bank and the issuing bank, after 7 handling fees, a sum of money was transferred, and it would be good to have 990,000 left over from 1 million.

Not only is it frustrating for customers, it’s also troublesome for banks. Especially the issuing bank and acquiring bank. In fact, they don’t receive much handling fees, and most of them are given to the main intermediary banks, which is Abrams in the example just now.

Bank. Because they have actually advanced funds to you, you can’t justify it without giving them more interest.

As for this payment, the customer may be emotional. After all, these operations are part of the bank's behind-the-scenes operation process, which is a process that is generally not allowed to be seen by customers. From the perspective of the issuing bank, the payment to the main intermediary is

It is reasonable to charge higher tolls and handling fees. But from the customer's perspective...

Your bank didn't do anything, but you charged me so much money! It was just a few keystrokes or transferring money. It feels like you didn't put in any work at all. You charge me so much money for no reason. You... you are greedy.

!!

"Yes, it will be much more convenient for us if we can use the NSS service. However, the bank's fixed operating costs will increase. Look at the charges, the annual fee. To be honest, it is a bit high. They used it before Abrams Bank

Fedwire systems are basically free of charge, or rarely paid."

"It's easy to say, we are the only bank that pays the fees. Forest Bank does not pay the fees. If necessary, just use our bank. It is my bank, so you don't need to bother with the clearing house. You

Making a settlement with Mr. William myself can save you a clearing fee. In this way, I spend one money and buy two enjoyments."

Comparing the Federal Reserve's fixed charges with the previous transfer fees, Carter found that even so, he could not actually make a profit. After all, for small local banks like them, there is not much demand for large-amount fund transfers.

, if there is no large demand to pay the handling fee to yourself, then paying this fixed annual fee is actually a bit of a loss.

This change is a bit similar to the underwriting system changing into an underwriting system. Originally, if there was a need, you would pay and then transfer the money. The single fee was high, but there was no fixed expenditure. Now it is a fixed expenditure every year, and then

Once you collect the handling fees, you will make your own profit. As for how many handling fees you can collect and whether you can use the handling fees to recoup the cost, that is your own business...

"By the way, if we do settlement between Black Bank and Forest Bank, do we need to use a third party? Even if we set up a settlement agency or something, doesn't the bill allow private institutions to open settlement business?"

"It's not necessary. I can directly handle the settlement with Manager William. Although they are two institutions, Forest Bank is more like our branch. In this case, it is actually an in-bank settlement. This does not require additional

Set up a settlement institution. But in the future, if you have more banks, we will open a special settlement center internally to handle these businesses.'
Chapter completed!