|Financial Services Policy Committee
A Committee of the Conference of Presidents
Federal Reserve System
Federal Reserve Banks Announce Changes to Increase Efficiency in Check Services
Minneapolis, Minn., May 25, 2005--As part of their ongoing effort to respond to the significant shift away from the use of paper checks and toward the much greater use of electronic payments, the Federal Reserve Banks will discontinue check processing at the Federal Reserve Bank of New York's East Rutherford Operations Center. That volume will be processed at the Federal Reserve Bank of Philadelphia. No firm date for the transition has yet been determined, but it is expected to take place in the second half of 2006. The change is aimed at increasing the efficiency of the Reserve Banks' check-processing operations, while continuing to provide high-quality services to depository institutions throughout the country.
"The step announced today will help the Reserve Banks reduce our check service operating costs in line with the continuing shift in consumer and business preferences for electronic payments," said Gary Stern, chairman of the Reserve Banks' Financial Services Policy Committee and president of the Federal Reserve Bank of Minneapolis. "Today's announcement marks the third annual review of our check infrastructure, which has resulted in a reduction in the number of locations processing checks. We will continue to evaluate our check processing infrastructure annually to ensure that we are well positioned to meet the needs of the nation's payment system."
Since 2003, the Reserve Banks have reduced the locations where they process checks from 45 to 29 as of today. An additional six locations, previously announced, will no longer process checks by early 2006, further reducing the number to 23. After the step announced today is completed, the Reserve Banks will process checks from 22 locations nationwide.
"The changes that we have implemented over the past three years have been good for the nation's payments system but difficult for our organization as we have been required to reduce our staff," said Stern. To assist affected staff, the Reserve Banks will offer a variety of programs, including separation packages, extended medical coverage and career transition assistance.
As a result of the action announced today, the Reserve Banks will reduce their overall check staff by approximately 80 positions, representing about 2 percent of the Reserve Banks' current check employees. At the East Rutherford location, about 140 positions will be affected. Some staff reductions may occur through attrition and there may be some opportunities for reassignment. The Reserve Banks estimate that they will add approximately 60 positions in Philadelphia to help process the additional volume.
In 2004, Reserve Banks' check volume declined at about a 12 percent rate. During 2005, check volumes have continued to decline; further decline is anticipated in the coming years. A 2004 study revealed that about 37 billion checks were paid in the United States in 2003, down from 42 billion in 2001 and 50 billion in 1995. Electronic payments, including those made by credit cards, debit cards, and through the automated clearinghouse system increased from about 30 billion transactions in 2001 to more than 44 billion transactions in 2003.
The Federal Reserve Banks' long-term check processing strategy will allow them to better meet the expectations of the 1980 Monetary Control Act. That act requires the Federal Reserve to set prices to recover, over the long run, its total operating costs of providing payment services to financial institutions, as well as the imputed costs it would have incurred and the profits it would have expected to earn had the services been provided by a private business firm.
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Federal Reserve System
2005 Check Restructuring
Federal Reserve check processing locations: By early 2006, checks will be processed at 23 Federal Reserve locations nationwide (see a listing of specific locations below). Based on the change announced today, checks will be processed in 22 locations when the office moves are completed in the second half of 2006.
Staff levels: The Federal Reserve System, including the Board of Governors, employs approximately 22,000 staff nationwide; approximately 3,800 of these employees work in the check function.
National check volumes: By Federal Reserve estimates, roughly 37 billion checks were paid in the United States in 2003, down from about 42 billion in 2001 and 50 billion in 1995. The Reserve Banks handled over 12 billion checks in 2004.
Listing of specific Federal Reserve locations (note that check processing sites current as of the end of the first quarter of 2006)
District 1: Boston, Mass. (head office, no check processing); Windsor Locks, Conn.
District 2: New York City, N.Y. (head office; the check processing center is located in East Rutherford, N.J.); Buffalo, N.Y. (branch, no check processing); Utica, N.Y.
District 3: Philadelphia, Pa. (head office)
District 4: Cleveland, Ohio (head office); Cincinnati, Ohio (branch); Pittsburgh, Pa. (branch, no check processing)
District 5: Richmond, Va. (head office, no check processing); Baltimore, Md. (branch); Charlotte, N.C. (branch)
District 6: Atlanta, Ga. (head office); Birmingham, Ala. (branch, no check processing); Jacksonville, Fla. (branch); Miami, Fla. (branch, no check processing); Nashville, Tenn. (branch, no check processing); New Orleans, La. (branch)
District 7: Chicago, Ill. (head office; the payments center is located at Midway Airport); Detroit, Mich. (branch, no check processing); Des Moines, Iowa
District 8: St. Louis, Mo. (head office); Little Rock, Ark. (branch, no check processing); Louisville, Ky. (branch, no check processing); Memphis, Tenn. (branch)
District 9: Minneapolis, Minn. (head office); Helena, Mont. (branch)
District 10: Kansas City, Mo. (head office); Denver, Colo. (branch); Oklahoma City, Okla. (branch, no check processing); Omaha, Neb. (branch, no check processing)
District 11: Dallas, Texas (head office); El Paso, Texas (branch, no check processing); Houston, Texas (branch, no check processing); San Antonio, Texas (branch, no check processing)
District 12: San Francisco, Calif. (head office); Los Angeles, Calif. (branch); Phoenix, Ariz. (cash processing facility); Portland, Ore. (branch, no check processing); Salt Lake City, Utah (branch, no check processing); Seattle, Wash. (branch)
2005 Other announcements