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Capacity

A person's ability (present and future) to meet financial obligations.

Capacity utilization rate

The percentage of the economy's total plant and equipment that is currently inproduction. Usually, a decrease in this percentage signals an economic slowdown, whilean increase signals economic expansion.

Capital

A person's savings and other assets, which can be used as collateral for loans.

Capital Assets Management Earnings Liquidity Sensitivity (CAMELS)

Rating system used by Federal Reserve examiners to help measure the safety and

soundness of a bank.

Capital market

The market in which corporate equity and longer-term debt securities (those maturing inmore than one year) are issued and traded.

Cash

Payment for goods or services in the form of coin or currency.

Cash flow

Money coming to an individual or business less money being paid out during a givenperiod.

Cease-and-desist order

An order issued after notice and opportunity for hearing, requiring a depositoryinstitution, a holding company or a depository institution official to terminate unlawful,unsafe or unsound banking practices. Cease-and-desist orders are issued by theappropriate federal regulatory agencies under the Financial Institutions Supervisory Actand can be enforced directly by the courts.

Central bank

The principal monetary authority of a nation, which performs several key functions,including issuing currency and regulating the supply of credit in the economy. TheFederal Reserve is the central bank of the United States.

Central bank intervention

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The buying or selling of currency, foreign or domestic, by central banks in order toinfluence market conditions or exchange rate movements.

Centralized

To bring under a single, central authority.

Certificate of Deposit (CD)

A form of time deposit at a bank or savings institution; a time deposit cannot bewithdrawn before a specified maturity date without being subject to an interest penaltyfor early withdrawal. Small-denomination CDs are often purchased by individuals. LargeCDs of $100,000 or more are often in negotiable form, meaning they can be sold ortransferred among holders before maturity.

Certified check

A check for which a bank guarantees payment. When the check is certified, it legallybecomes an obligation of the banks, and the funds to cover it are immediately from thedepositor's account.

Chapter 13

Adjustments of debts of an individual with regular income under the Federal Bankruptcy Code.Chapter 13 enables a debtor who is an individual to develop and perform a plan for therepayment of creditors

Financial Services

Test your knowledge about the financial services function of the Federal Reserve throughthisquizorword search. Additionalquizzesandword searchesare also available.

ACH

The Automated Clearinghouse (ACH) is an electronic payment network through whichdepository institutions send each other electronic credit and debit transfers. Some examples are

payroll deposits, corporate payments to vendors, Social Security payments, insurance premiumpayments and utility payments.

Fedwire

The Fedwire funds transfer system is a large-dollar electronic payment system owned andoperated by the Federal Reserve Banks that transfers funds between financial institutions.Participants typically transfer large dollar, time-critical payments, such as to disburse or repay

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large loans or to settle real estate transactions. The majority of Fedwire transactions are initiatedon-line and all transactions are completed in seconds.

Savings Bonds:

The Federal Reserve Banks issue, service, and redeem tens of millions of U.S. savings bondseach year on behalf of the Treasury. Savings bonds are a contract evidencing a loan made to theUnited States. For more information about savings bonds, visit the United States Department ofthe Treasury Web site.

Cash

It's up to the Fed to make sure there is enough money in circulation. Reserve Bank officesmaintain cash and coin processing operations to accept deposits and distribute cash and coin tofinancial institutions. When cash and coin are deposited with the Reserve Banks, notes that aresuspected of being counterfeit are separated from the rest and forwarded to the Secret Service.Notes that are too worn for recirculation are destroyed using a shredding machine and their facevalue is deducted from the total amount of Federal Reserve notes outstanding.

Each of the twelve Federal Reserve Banks is authorized by the Federal Reserve Act to issuecurrency. Currency must be secured by legally authorized collateral, most of which is in the formof U.S. Treasury and federal agency securities held by the Reserve Banks. The notes aredesigned and printed by the Bureau of Engraving and Printing of the Department of the Treasury

and are delivered to the Reserve Banks for circulation.

Check Collection The Federal Reserve System operates a nationwide check clearing system that processes

checks, drafts and similar items. When a depository institution receives deposits ofchecks drawn on other institutions, it may send the checks for collection to a FederalReserve Bank. For checks collected through the Federal Reserve Banks, the accounts ofthe collecting institutions are credited for the value of the checks deposited for collectionand the accounts of the paying banks are debited for the value of checks presented forpayment. Most checks are collected and settled within one business day.A 2004 federal law, the Check Clearing for the 21st Century Act, also known as Check

21, facilitates the electronic exchange of checks. Check 21 permits banks to replaceoriginal checks with substitute checks, special paper copies of the front and back of the

original check that are the legal equivalent of the original check. Banks can now make animage of a check, send the image electronically to another location and then print asubstitute check from the image to present for payment locally.

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A Bank for the Government

Additionally, the Federal Reserve acts as a fiscal agent or bank to the federal government byproviding financial services to the United States Department of Treasury and by selling andredeeming government securities such as Savings Bonds and Treasury bills.

One of the core responsibilities of the Federal Reserve Banks is to serve as fiscal agent anddepository for the United States government. In this role, the Reserve Banks act as the federalgovernment's bank and perform several services for the Treasury. These services include:

Maintaining accounts for U.S. Treasury Processing government checks, postal money orders and U.S. savings bonds Collecting federal tax deposits