Pacific Continental Bank Blog Why Do Banks Close on Columbus Day?

For many readers, yesterday came and went with little notice of the fact that it was Columbus Day. After all, Columbus Day is one of the most unevenly observed holidays in the United States. Most businesses are open, most schools are open and certainly most retail stores are open. However, one particular industry almost universally observes the holiday and closes their doors - financial institutions. And for many people, and certainly for many bank clients, a simple question often surfaces this time of year. Why are banks closed on Columbus Day?The simple answer is that banks follow the Federal Holidays schedule. In fact, the industry has, for the most part, followed that schedule since 1870 when Federal Holidays were first established.The more complex answer is that banks are closed due to the fact that the Federal Reserve (Fed), a federal institution, is closed.Of course, most banks are not federally owned or controlled and, therefore, aren't required to close on Federal Holidays, but the fact remains that so much of business relies on the Fed.For example, banks are becoming increasingly responsible for processing electronic payments such as direct deposits for payroll, online bill payments, insurance payments, loan and mortgage payments, mobile check deposits and peer-to-peer transactions. These types of transactions all use the Automated Clearing House (ACH), which is an electronic network that transfers funds from one bank account to another at any bank in the country. Banks gather information about initiated ACH transactions throughout the day, and at predetermined times they send the information to the Federal Reserve to be processed, sorted and cleared. From there, the Fed sends the information to recipients' banks, where funds are deposited into their accounts.But when the Federal Reserve is closed, these transactions stall. This delays the amount of time it takes for a check to clear, for payroll to get deposited into an employee's account or other transactions to be completed. Since the Fed is responsible for a critical step in the process and is closed for the day because of the holiday, banks follow suit in order to prevent further delays and complications.For us at Pacific Continental Bank, we enjoyed the three-day weekend, but now we are glad to be back and glad to serve you, our clients.