Federal Reserve float

Federal Reserve float

Float is checkbook money that appears on the books of both the check writer (the payor) and the check receiver (the payee) while a check is being processed. Federal Reserve float is float present during the Federal Reserve's check collection process. To promote efficiency in the payments system and provide certainty about the date that deposited funds will become available to the receiving depository institutions (and the payee), the Federal Reserve credits the reserve accounts of banks that deposit checks according to a fixed schedule. However, processing certain checks and collecting funds from the banks on which these checks are written may take more time than the schedule allows. Therefore, the accounts of some banks may be credited before the Federal Reserve is able to collect payment from other banks, resulting in Federal Reserve float.

Availability Float

A deposit into a bank account that has not yet cleared. For example, one may deposit a check for $1,000 from an out-of-state bank. The funds may be posted to the account immediately, but they will not become available to the account holder until the issuing bank honors the check and transfers the funds to the receiving bank. This process can take as long as five business days. See also: Check hold.
References in periodicals archive ?
In the days following the attack, the closure of the nation's air transportation system led the Federal Reserve to extend record levels of credits to depository institutions as Federal Reserve float surged.
government, and foreign banks and official institutions, less cash items in the process of collection and Federal Reserve float, and (4) other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions.
Federal Reserve float is created when the account of the depository institution presenting a check for payment is credited before the account of the depository institution on which the check is drawn is debited.
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