The Federal Reserve is planning several enhancements to its Fedline personal-computer software, used by many banks to initiate electronic transactions.

A central bank official said last week that one of the improvements would enable banks to bid for Treasury securities electronically.

Fed officials also said they planned to keep Fedline up with rapid advances in computer technology such as image processing, to help banks streamline their interaction with the Fed.

Positive Feedback

"The bankers I've talked to have had nothing but good things to say about Fedline," said Steve Potter, assistant vice president and automated clearing house product manager at Barnett Banks Inc., Jacksonville, Fla.

"It looks like the Fed's trying to update the software to take advantage of the new technologies that are coming out."

Fedline, established in 1986, is running on nearly 10,000 personal computers at banks throughout the country, said Gordon Tannura, Fedline product manager at the Federal Reserve Bank of San Francisco.

The program is used primarily by community banks as their connection to the central bank, and by large banks to back up mainframe-based communications software.

Many Functions Supported

Fedline supports automated clearing house and wire transfer transactions, interbank Treasury securities transfers, electronic monitoring of Fed account balances, currency orders, and electronic reporting of financial statistics to the central bank.

Banks receive the software free, but then pay a connection charge of $65 a month for a link to the Fed using telephone lines, or $300 to $700 a month for connections over private, high-speed circuits.

Electronic bidding for Treasury securities are considered an important enhancement. Currently, most banks submit oral bids for Treasury auctions over the telephone, Mr. Tannura said.

Fedline will enable banks to tap bids into their personal computers and send them electronically to the Fed.

Mr. Tannura said the Fed was developing this feature in response the Salomon Brothers, scandal, in which the investment bank admitted to falsifying customer orders and buying more Treasury bonds than the government allowed in a series of auctions last year. Salomon agreed to pay $290 million for its transgressions.

The new Fedline bidding feature will make it easier to police Treasury bidding violations such as those committed by Salomon by creating an electronic audit trail, Mr. Tannura said.

Mr. Tannura added that the electronic bidding is now being used in the Kansas City Fed district and will be rolled out nationwide in the third quarter.

Another enhancement is a check adjustment feature that will help banks expedite the investigation of check delivery and encoding errors. Banks will be able to notify the Fed electronically when a check is missing from a bundle delivered by the Fed, or when settlement data encoded on a check are inaccurate, Mr. Tannura said.

After notifying the Fed, banks will be required to mail checks and documents needed to settle the claim to investigators. But banks will be able to use their Fedline software to monitor the progress of the investigation.

Test in California

The check adjustment feature is being tested in the San Francisco Fed district and will be available nationwide next year as an optional component of Fedline, Mr. Tannura said.

The Fed is considering adding in 1995 and 1996 a wide range of new technologies to Fedline that could make the software easier to use, while improving its security measures.

For example, the Fed is investigating whether to equip Fedline with a graphical interface in which complex computer commands are translated into colorful, easy-to-understand symbols.

The Fed may also enhance the software to support document image management capabilities so that banks could transmit electronic images of documents to the Fed instead of mailing the actual paper.

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