For about four hours Wednesday, Federal Reserve systems that execute millions of financial transactions a day — everything from payroll to tax refunds to interbank transfers — were disrupted by what appeared to be some sort of internal glitch.
Systems were restored by the end of the day, but the outages once again raise questions about the resilience of critical infrastructure that Americans rely on to process payments. The episode follows two significant disruptions to the Fed’s payment services that occurred in 2019.
“It does raise awareness about what their business continuity measures are and what’s going on over a single point of failure that doesn’t have a lot of redundancies. It’s pretty concerning,” said David Hart, president of consulting firm NETBankAudit who was previously a senior bank examiner and IT auditor at the Richmond Fed.
All services were restored by 7:27 p.m. New York time, according to a website operated by the central bank. The outages affected the automated clearinghouse system known as FedACH and the Fedwire Funds interbank transfer service as well as several other systems comprising the U.S. payment infrastructure.
“A Federal Reserve operational error resulted in disruption of service in several business lines,” Jim Strader, a spokesman for the Richmond Fed, said in an e-mailed statement. “We are restoring services and are communicating with all Federal Reserve Financial Services customers about the status of operations.”
The Fed system’s national IT operations are run out of the Richmond reserve bank. The central bank’s payment services website noted the disruptions were discovered around 11:15 a.m. and Strader declined to comment on whether they were a result of system updates or human error, but confirmed that the system maintains operations in other locations.
Inside financial firms, traders were generally calm, still handling transactions. A mood of initial confusion subsided as many realized they weren’t affected, one said.
ACH is a national system that processes batches of electronic funds transfers such as payroll, social security benefits, tax refunds, corporate payments to vendors and utility payments, according to the Fed’s website. The commercial service handled 62.1 million transactions a day on average in 2019 with an average value of $1,802, the latest year for which data are available.
In a posting on its website at 2:46 p.m. the Fed said it was taking steps to ensure the resilience of its services but urged customers to double check that any messages they had sent or received had been reconciled.
The disruptions come as the central bank is preparing to take on even more responsibility. It’s separately developing its own same-day settlement payment system called FedNow. It is expected to operate in direct competition with an industry-run payments system started in 2017 by an organization of Wall Street banks, including JPMorgan Chase & Co. and Citigroup Inc.
The Fed’s system has suffered problems before. In 2019, the FedWire interbank funds transfer service went down for about three hours. The Fed blamed the outage on “an internal technical issue,” but declined to provide more details.
Bloomberg News sought additional information about that incident under the Freedom of Information Act, but the request and a subsequent appeal were denied by the Board of Governors.