Question

As the bankers’ bank, the Federal Reserve Banks operate the payments system in the United States? What are the different components of the payments system that they operate? Briefly describe.

Answer 1

A Federal Reserve Bank is a regional bank of the Federal Reserve System, the central banking system of the United States. There are twelve in total, one for each of the twelve Federal Reserve Districts that were created by the Federal Reserve Act of 1913.

Reserve Bank activities serve primarily three audiences bankers, the U.S. Treasury, and the public.public. Reserve Banks are often called the “bankers' banks” because they provide services to commercial banks similar to the services that commercial banks provide for their customers.

A payment system is any system used to settle financial transactions through the transfer of monetary value, and includes the institutions, instruments, people, rules, procedures, standards, and technologies that make such an exchange possible.

A common type of payment system is the operational network that links bank accounts and provides for monetary exchange using bank deposits.a system is the use of cash-substitutes; traditional payment systems are negotiable instrumentssuch as drafts (e.g., checks) and documentary credits such as letters of credit.few include debit cards, credit cards, electronic funds transfers, direct credits, direct debits, internet banking, and e-commerce payment systems.

Examples of payment systems that have become globally available are credit card and automated teller machine networks. Specific forms of payment systems are also used to settle financial transactions for products in the equity markets, bond markets, currency markets, futures markets, derivatives markets, options markets, and to transfer fundsbetween financial institutions both domestically using clearing and real-time gross settlement (RTGS) systems and internationally using the SWIFT network