The Federal Reserve suffered a rare outage on Wednesday that shut down key payment services used by banks, businesses and government agencies for several hours.
According to The Wall Street Journal, Fed officials “couldn’t immediately recall a similar episode affecting its systems, which had been seen as extremely reliable.”
Among the systems that went down during the outage were its Fedwire settlement service and FedACH, the pivotal automated clearinghouse system that connects depository and related institutions sending electronic credit and debt transfers.
“A Federal Reserve operational error resulted in disruption of service in several business lines,” the Fed said in a statement. “We are restoring services and are communicating with all Federal Reserve financial services customers about the status of operations.”
Fedwire and the ACH system appeared to be coming back online around 2:45 p.m. ET, more than three hours after the Fed said it had become aware of a problem.
As CNN reports, “Banks, businesses, and government agencies rely on Fedwire to transfer vast sums of money around the U.S. banking system. More than $3 trillion was transferred daily using Fedwire during the fourth quarter.”
The ACH system handles direct deposits of payroll, Social Security, and income tax refunds as well as auto payments for mortgages and utility bills.
Aaron Klein, a senior fellow at the Brookings Institution, said Wednesday’s outage underscored broader problems with the Fed’s payments systems, in which checks can take two business days to clear. Central banks in other countries — including England, Brazil, and Mexico — implemented instant payment systems more than a decade ago.
“For Americans who were counting on their paychecks being available Friday the 26th, if this glitch means that my payment isn’t going to turn up until March 1, it could result in millions of dollars in overdraft fees for people living paycheck to paycheck,” Klein told the Journal.
But a Fed spokesman said the central bank is extending its hours of operations to clear the backlog of transactions and “would not expect there to be financial consequences for individual account holders because of the temporary disruption.”