Financial Update (Third Quarter 2004)


 New Check 21
 Products for Banks

 Fed Responds to
 Declining Check

 Bank Regulators
 Watch Real
 Estate Market

 Call Reports

 Regulating Fannie
 and Freddie

 New Report on
 Banking Industry

 Fair Credit Act


 Data Bank

 Circular Letters



Fed Responds to Declining Paper Check Volumes

As the transition from paper checks to electronic payment methods accelerates, the Federal Reserve Banks have responded with a plan, announced Aug. 2, to discontinue check processing at nine locations throughout the nation. Even with these changes, the Fed will continue providing check services to financial institutions nationwide.

Responding to change
By decreasing the number of check-processing locations and increasing capacity at other sites, Reserve Banks will reduce their check service operating costs in line with the rapid and ongoing shift in consumer and business preferences from paper checks to electronic payment methods. These relocations will take place through 2005 and early 2006. Reserve Banks will soon announce the schedule for implementing the restructure.

Aug. 2 announcement
Federal Reserve Financial Services
Previous announcement (from Feb. 6, 2003)
New Check 21 products for banks

In 2003, Reserve Banks discontinued check processing at 13 locations, going from 45 to 32 processing sites. After the changes announced in August are complete in early 2006, the Reserve Banks will process checks at 23 locations nationwide.

The latest restructuring will affect check operations at the following offices:

Check operations will close Check operations will move to
Boston, Mass. Windsor Locks, Conn.
Columbus, Ohio Cleveland, Ohio
Birmingham, Ala. Atlanta, Ga.
Nashville, Tenn. Atlanta, Ga.
Detroit, Mich. Cleveland, Ohio
Oklahoma City, Okla. Dallas, Texas
Houston, Texas Dallas, Texas
Portland, Ore. Seattle, Wash.
Salt Lake City, Utah Denver, Colo.

Improving efficiency
“These changes are intended to improve the efficiency of our check operations while maintaining high-quality check services to depository institutions nationwide,” said Gary Stern, chairman of the Reserve Banks’ Financial Services Policy Committee and president of the Federal Reserve Bank of Minneapolis. “But streamlining our check infrastructure is only part of the Reserve Banks’ strategy to improve efficiency; for example, we are also launching new products and services to support the implementation of the Check 21 Act in October 2004.”

While checks remain the country’s most popular form of noncash retail payment, they now make up only 60 percent of noncash retail activity compared with 85 percent in 1979, Fed studies show. In 2001, another study revealed that about 42 billion checks were written in the United States in 2000, down from about 50 billion in 1995.

More declines foreseen
In 2003, the Reserve Banks’ check volume fell by about 5 percent. During 2004, the decline has accelerated, and such declines are expected to continue in the coming years.

Customers should contact their local business development representatives with any questions.