Financial Update (April-June 2000)


Cover Story

FEDNET Upgrade

International ACH

Financial Modernization

New Fed Video

Golden Dollar

Money Brochure


Did You Know?

Data Bank

The Docket

FEDNET® to Upgrade to Meet Customer Needs

After almost two decades of successful operation, FEDNET® is being upgraded. The FEDNET network, which supports electronic connections between the Federal Reserve and its depository institution customers, is being updated. Core communications will be supported by a technology called frame relay.

Frame relay essentially breaks down electronic data transmissions, relaying them to their respective destinations faster and more efficiently. The FEDNET connections that will be affected most immediately by the upgrade are depository institutions’ leased line connections and internal connections used by Federal Reserve Bank offices.

Speeding up service

FEDNET was established as a national network to meet stringent availability, security and contingency requirements of the mainframe-based payments system. According to Bruce J. Summers, director of Federal Reserve Information Technology, “significant technological advances . . . now offer faster, more efficient communications without compromising the Federal Reserve’s high standards for availability and security. The new network will allow depository institutions and other business partners to access Federal Reserve services at higher speeds and . . . will support data transmissions using more diverse communication protocols.”

New customer requirements

Since the last major redesign of FEDNET in the late 1980s, customers’ needs have changed. Customers now require support for Internet protocol transmissions, faster line speed to support larger electronic data flows, enhanced security protection and lower costs.

The upgraded FEDNET will feature higher line speed connections and triple data encryption standard (DES) encryption of the full data transmission. Triple DES is a complex scrambling technique adopted by Federal Reserve Banks to protect data transmitted electronically. All connections will be backed up by a digital dial access arrangement.

The new FEDNET is expected to be functional by mid-year 2000, but some pilots may begin before then.