Some Fund Transfers Don't Get In Even Under the Wire --- Delays Of Up to 2 Hours Are Increasing; Angry Firms Blame Banks
NEW YORK -- Electronic transfers of money eliminate the excuse that a tardy payment is "in the mail." But in its place has grown a high-tech excuse that a late payment is "on the wire."</br></br>Increasingly, corporate cash managers complain that this is what they're hearing when they inquire about why multimillion-dollar sums that were supposed to be wired to their accounts haven't shown up. Such delays can be costly because corporations must borrow money to meet deadlines for closing transactions if they don't receive wired funds in time.</br></br>A recent survey by the National Corporate Cash Management Association, a 2,000-member organization based in Newtown, Conn., indicates that one in five corporations in the past year reported problems with delays in funds sent over the wire network operated by the Federal Reserve System. In some cases, the delays lasted as long as two hours, the association says.</br></br>The problem, cash managers say, is with some banks, not the Fed wire, which is designed to allow the Federal Reserve System and depository institutions to transmit funds and securities quickly and efficiently. The wire daily transmits an average of $500 billion; the typical transaction is $2.5 million. Bankers acknowledge there are problems but assert that the snags are isolated.</br></br>Cash managers cite various reasons for the delays. Says Steve McGrath, cash manager for Storage Technology Corp., Louisville, Colo., "Occasionally you get a wire late in the afternoon, and you wonder why it moved so late. The system could be full. The company that's paying you could be waiting until the wire deadline. Or, the company could have initiated the payment earlier, but the bank holds it up because it's up against its overdraft cap."