Federal Reserve Financial-Services Systems Disrupted for Hours -- 3rd Update
February 24 2021 - 4:36PM
Dow Jones News
By Paul Kiernan
The Federal Reserve said Wednesday an "operational error"
disrupted all of its financial-services systems for several hours,
including the electronic payments settlement service used by banks,
businesses and government agencies.
"A Federal Reserve operational error resulted in disruption of
service in several business lines. We are restoring services and
are communicating with all Federal Reserve Financial Services
customers about the status of operations," Jim Strader, a spokesman
for the Richmond Fed, which administers the central bank's
financial services, said in an emailed statement.
"While root cause is currently being evaluated, there is no
indication that the issue is the result of a cyberattack," a
Treasury Department official said in a statement sent to banking
regulators at 1:47 p.m. ET.
In addition to setting monetary policy, one of the Fed's
lesser-known roles includes acting as a bank for the nation's
banks, as well as for the U.S. government. It provides services
including collecting checks, electronically transferring funds, and
selling and redeeming Treasury bills.
The Fed sent an alert to such customers at 12:43 p.m. ET of "a
possible issue or disruption to multiple services." In a subsequent
alert, it said Fed staff became aware of "a disruption for all
services" beginning around 11:15 a.m.
"We acknowledge that payment deadlines are impacted and will
communicate remediation efforts to our customers when available,"
the Fed said.
The full impact of the disruption couldn't immediately be
discerned. But the Treasury memo to regulators said it prompted the
Payments Risk Committee -- a private-sector group of senior bank
managers that is sponsored by the New York Fed -- to initiate
"emergency communications protocols." Treasury said it would
provide the group with updated information through periodic
conference calls.
The disruption caused a payment backlog to build up at banks,
which they began working through once the issue resolved. The Fed
told clients "the backlog of files may take time to clear."
One of the services taken offline was the Fedwire Funds Service,
which the Fed describes as "the premier electronic funds-transfer
service that banks, businesses and government agencies rely on for
mission-critical, same-day transactions." Entities use the service
to send or receive payments, settle positions with other financial
institutions and to submit tax payments, among other
activities.
Also affected were FedACH, an automated clearinghouse network
that enables debit and credit transactions, and Fedwire Securities,
which provides transfer and settlement services for securities
issued by the U.S. Treasury, government agencies and
government-sponsored housing enterprises.
The first service to be restored -- at 2:17 p.m. ET -- was the
Fed's central bank programs, which include setting interest rates
and allowing financial institutions to review and manage the money
they hold at the Fed, called reserves. It was followed by Fedwire
and FedACH shortly before 3 p.m.
The Treasury Department's memo to regulators said the disruption
"required a reboot of servers impacting all payment channels."
--Andrew Ackerman and Michael S. Derby contributed to this
article.
Write to Paul Kiernan at paul.kiernan@wsj.com
(END) Dow Jones Newswires
February 24, 2021 16:21 ET (21:21 GMT)
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