1995 Annual Report: Highlights of 1995
Building upon its growing reputation for excellence in operations, outstanding
service to customers, and effectiveness in the oversight of financial
institutions, the Federal Reserve Bank of San Francisco took on major
new leadership responsibilities in 1995. In particular, the District played
a key role in the Federal Reserve System's efforts to integrate its financial
services activities on a more national basis.
Faced with continuing consolidation and restructuring of the financial
services industry, as well as the push toward interstate branch banking,
the System reorganized its financial services management structure along
major product lines early in the year, awarding the Twelfth District responsibility
for System-wide support functions, including accounting, automation, and
customer electronic access. The District also played a major role in shaping
the System's response to changing customer and constituent needs in the
retail payments, wholesale payments, and fiscal services product areas,
as well as in the areas of banking supervision and community affairs.
To meet these leadership challenges and provide for a more flexible organization,
the District reorganized its management structure early in the year, replacing
the former Management Committee with a new policy-making framework that
comprises seven key committees: Executive; District Steering; Operations;
Information Management; Personnel; Capital Budget and Building; and Loan.
This new structure is designed to:
- ensure in-depth review of strategic issues;
- provide for greater involvement on the part of those with direct knowledge
of the issues; and
- promote increased information-sharing and team building among Bank
This new structure will optimize resources in fulfilling the District's
leadership responsibilities and achieving continuing gains in productivity,
cost control, and customer responsiveness.
Twelfth District's leadership was evident in a number of initiatives in
1995. In addition to leading the development of a System-wide strategy
for implementation of digital image technology and image-based check services,
the District lent expertise to a variety of projects aimed at enhancing
the efficiency and quality of check services nationwide.
While making significant contributions to Federal Reserve System efforts,
the District implemented a variety of products to appeal to new customers,
and operational initiatives that resulted in continued improvement in
productivity and unit costs. These efforts enabled the District to end
the year in a positive cost recovery position.
The District's Automated Clearing House (ACH) continued a trend of outstanding
cost recovery, productivity, and unit cost management in 1995. Several
new projects were initiated to improve operations and expand the scope
of the ACH. A concerted effort to convert Reserve Bank payments to the
ACH resulted in more than 50 percent of Twelfth District vendor payments
being made through the ACH at the end of 1995, compared to 26 percent
at the end of 1994. Another initiative gave customers the opportunity
to receive ACH advices by FED-Mail rather than in paper form. At year-end,
more than 190 customers were enjoying this efficiency, and more are converting
bring together expertise in the business of wholesale electronic payments,
including securities and wire transfer, the District formed a new Wholesale
Payments department, which parallels the new System-wide Wholesale Payments
Product Office. Under the leadership of this new department, cost recovery
exceeded targets, and funds transfer staff embarked on an ambitious key
customer outreach program, visiting 20 large customers in three states
to share expertise and expectations.
In the District's Fiscal Services function, steep increases in interest
rates during the first quarter dramatically increased the demand for Treasury
securities and resulted in a remarkably high volume of activity in the
Treasury Direct and Customer Service units at all five offices.
In 1995, Cash Services made significant progress toward increasing currency
processing capabilities, reducing unsorted backlogs, and enhancing controls.
Seven new currency processing machines went into production in 1995, bringing
the District total to 18, three-quarters of the total planned. Along with
the new equipment have come significant increases in processing capability
and the ability to support the new 1996 series $100 note. Total daily
processing increased nearly one-fourth over 1994.
In the continuing effort to balance public policy interests with customer
service, the District announced a revised Cash Service Structure that
offers depository institutions a basic level of free service, while providing
additional service for a fee. Cash and Business Development staff worked
in concert to solicit customer input in the development of the new structure,
and to communicate these changes to customers. Bank staff also held seminars
for over 1,500 customers to explain the 1996 series currency release and
counterfeit detection methods.
The District also assumed major national leadership responsibilities
in the cash area in 1995 by chairing the System's Advisory Group on Cash
Services. The Advisory Group ensures regional needs and issues are factored
into System policy-making in cash services.
in January 1995, the Support Function Office (SFO) assumed a broad range
of new System-wide responsibilities. The office was structured into three
major divisions dealing with accounting, automation, and customer electronic
access. From this base, the SFO oversees seven central business administration
functions and 18 applications which share resources throughout the Federal
A key accomplishment during the year was the successful migration of
FED-Mail from pilot to full production status. FED-Mail uses electronic-mail
technology to deliver low-security data to customers. By year end 1995,
more than 1,100 customers were using the new information delivery vehicle
on a daily basis.
Research focused during 1995 on a wide range of national, regional, and
regulatory policy issues, including monetary policy in the U.S. and monetary
policy and exchange rates in East Asian countries. Staff also examined
longer-term issues, such as economic growth in the U.S. and abroad, NAFTA-like
trade agreements, and measures of international financial integration.
Research on labor markets dealt with seniority and the duration of unemployment,
as well as health insurance and worker mobility. Regional analysis addressed
population flows between California and the rest of the District. Staff
also studied various regulatory initiatives, including the implications
of bank mergers on competition and structure.
department published an increased number of papers in academic journals,
as well as in Bank publications. In addition, economic education and public
programs continued to expand their reach, and Economic Research staff
delivered 74 speeches to outside organizations, made 48 presentations
at conferences and seminars, and held 75 meetings with visiting officials
from the United States and abroad, principally from Pacific Basin countries.
In March, the department co-hosted an academic conference on monetary
policy in a changing financial environment with the Center for Economic
Policy Research at Stanford University.
The Twelfth District continued to provide significant support to the
Federal Reserve System in such areas as capital markets, emerging issues,
and programs to enhance the supervisory process. Additionally, international
outreach efforts increased during the year and included various initiatives
with China, Japan, Malaysia, and the Philippines. The District also hosted
central bankers from Asia, Africa, and Europe; and provided technical
assistance to Russia, Moldova, Poland, and Slovakia.
There were 59 state member banks in the District at year end--8 with
assets exceeding $1 billion, and 21 with assets between $100 million and
$1 billion. In addition, the District supervised 214 holding companies
with assets totaling $461 billion, 136 branches and agencies of foreign
banks, 20 Edge and Agreement corporation offices, and 38 representative
Applications activity increased during the year from 270 in 1994 to 310
in 1995, reflecting increases in both domestic and international applications
and a continuation of expansion and consolidation trends.
leadership of the Twelfth District in the area of community reinvestment
is well recognized. In 1995, Community Affairs sponsored 12 seminars throughout
the District, providing information to more than 500 lenders on how to
prepare for the new CRA examination, which will focus on bank performance
with the lending, service, and investment tests.
At two other Community Affairs-sponsored conferences, more than 600 bankers,
non-profit representatives, and government officials heard nationally
recognized speakers discuss community reinvestment, rural community development,
fair-lending issues, and successful public-private partnerships.
As part of its continuing efforts to provide guidance on the formation
of bank lending consortia, the department played a key role in the development
of the California Economic Development Lending Initiative, a statewide
consortium of 34 banks and three corporations which pooled $50 million
to provide financing to small businesses that currently do not have access