Financial Services Policy Committee
May 31, 2006
Federal Reserve Banks Announce Change to Cash Infrastructure
For immediate release
Minneapolis, Minn.-- After completing a two-year review of their cash infrastructure, the Federal Reserve Banks today announced that the cash processing operation at the Federal Reserve Bank of Kansas City's Omaha, Neb., branch will be changed to a cash depot. This change is part of a broader effort to update the Federal Reserve's infrastructure for processing currency.
"We want to emphasize that the Federal Reserve will continue to make cash services available to depository institutions throughout the country, although in some cases we are employing a different business model. We want to ensure that we're making the best use of resources while satisfying the need for cash services," said Gary Stern, chairman of the Reserve Banks' Financial Services Policy Committee and president of the Federal Reserve Bank of Minneapolis.
Since 2004, the Federal Reserve discontinued cash services through branches in Little Rock, Ark., Louisville, Ky., Buffalo, N.Y., Portland, Ore., and Oklahoma City, Okla., and established cash depots in those cities.
A cash depot is an alternative market presence for Federal Reserve cash services. With a cash depot, the Federal Reserve contracts with a third party--usually an armored carrier--that acts as a secure collection point for Federal Reserve currency deposits from the region's depository institutions. The depot also distributes currency orders that depository institutions have placed with the Reserve Bank. The work of counting deposits and preparing orders is done by a Federal Reserve office in another city. The Federal Reserve pays for the transportation between the Reserve Bank office and the depot. The depot operator follows strict procedures developed by the Federal Reserve.
The Omaha cash depot will be serviced by the Federal Reserve Bank of Kansas City's head office. Approximately 16 cash employees work at the Omaha branch, but the number that will be affected by this change is undetermined at this time. The Reserve Bank will offer a variety of programs to staff that are affected by these decisions, including separation packages, extended medical coverage and career transition assistance.
Cash remains a vital component of the nation's payment system. While studies show that the use of electronic payments is growing, the amount of deposits and orders processed through Reserve Banks has increased nearly 66 percent, to 76 billion banknotes, between 1995 and 2005.