Financial Update (October-December 1997)
Rivlin Forum Participants Favor
Fed Role in Payments Systems
large majority of the 450 institutions that took part in the Federal Reserve's payments systems forums in 1997 said they prefer that the Fed continue to provide retail payments services such as processing checks and automated clearinghouse (ACH) transactions, according to a recent report published by the Fed. Additionally, most of the participants said that they want the Fed to take a leading role in the future development of the nation's retail payments system.
Forums Examine Fed Role in Payments
The 52 regional forums, which were held this summer throughout the country, were conducted by the Committee on the Federal Reserve Payments Mechanism, led by Federal Reserve Vice Chair Alice M. Rivlin. The committee is examining the Fed's future role in the nation's payments system in light of the rapid and significant changes occurring in financial services and technology. The committee has not yet brought specific policy options to the Board of Governors or the Conference of Reserve Bank Presidents.
Discussions at the forums focused on five hypothetical scenarios depicting various alternative roles of the Federal Reserve, ranging from exiting the retail payments system to adopting a leadership role in the industry. The report summarizes forum participants' views on how the Fed's alternative roles would affect the price and accessibility of services as well as the efficiency and integrity of the retail payments system.
While a few large banks and clearinghouses thought the Fed should exit the check collection and ACH business, the overwhelming majority of forum participants opposed a Fed withdrawal primarily because of concern about payments system disruptions, according to the report.
Two Recommendations Are Clear
According to Rivlin's testimony before Congress, two general conclusions have emerged from the deliberations. "First, for the next few years at least, the Federal Reserve can best meet the expectations of Congress for a safe and reliable payments system by continuing to provide check and ACH services as efficiently as possible. Second, the Federal Reserve needs to work more closely and collaboratively with the participants and users of the payments system, both to enhance the efficiency of current payment instruments (check and ACH) and to evolve strategies for moving to the next generation of payment methodologies."
The committee is using input from the forums in preparing its final report, to be released by year's end. That report will include the committee's recommendations for the Fed's future role in the payments system.