The primary focus of our Bank during 1999 was to ensure the banking
system's operational readiness for the transition to the year 2000.
Our activities capped off a multi-year effort to prepare our internal
systems and to ensure the preparedness of financial institutions'
systems that support the nation's payments systems. As a regulator
of financial institutions and the nation's money manager, our charter
directs us to ensure safety and soundness in the operations of financial
institutions, to provide stability in financial markets, and to
maintain the smooth functioning of the nation's payments system.
Throughout the year we tested applications with the depository
institutions that are our customers, implemented updated systems,
reviewed institutions' readiness plans, and regularly communicated
our progress to the public. We produced the brochure "How Is the
Banking Industry Preparing for Y2K?" in four languages and distributed
it to more than 150,000 constituents, along with providing speakers
on the subject of Y2K readiness for 45 events and 22 seminars. Our
Bank's credit and risk management area prepared District financial
institutions to obtain short-term credit in the event of Y2K-related
liquidity problems. We also devoted considerable resources to ensuring
that adequate supplies of cash would be available to meet the higher
demand for currency expected in the days leading up to the century
The Bank did not allow its Y2K preparations to eclipse other critical,
long-standing objectives. In our financial services functions, we
continued to focus on promoting electronic transactions and transitioning
customers from paper-based delivery of transaction information to
electronic delivery. In addition, we prepared for the Systemwide
consolidation of two of our fiscal agency functions, TreasuryDirect
and Treasury Tax and Loan (TT&L), in 2000.
From left (standing):
Gordon R.G. Werkema, Executive Vice President; John F. Moore,
First Vice President; Jack H. Beebe, Senior Vice President
and Director of Research
From left (seated):
Terry S. Schwakopf, Senior Vice President; Robert T. Parry,
In another significant event, we received final approval from the
Board of Governors to establish a cash operations center in Phoenix
to meet the cash needs of the growing Arizona market. We will break
ground on that facility in the spring of 2000in preparation for
a September 2001 opening.
In the retail payments area, the Bank continued to promote electronic
payments and electronic collection of paper-based payments by offering
competitive and innovative services. The Bank's Automatic Bill Payment
(ABP) Program is a joint marketing program that enables utilities,
municipalities, and newspapers that share common customers to coordinate
direct payment promotional efforts using a common enrollment form.
The San Francisco Bay Area ABP Program, which started in 1997, now
includes 14 billers and 30 financial institutions with a total of
In addition, the Bank provided project leadership for the Treasury
Point of Sale Check Conversion project, which is testing the feasibility
and consumer acceptance of converting check payments made at the
point of sale to ACH debit transactions for faster processing and
speedier collection. By year-end, the U.S. Patent Office had two
payment terminals generating ACH debits, and a number of other Treasury
agencies were on track to convert checks in 2000, including the
Department of Veterans Affairs Canteen Service, the Bureau of Printing
and Engraving, and the U.S. Customs Office.
Also, to promote electronic collection of checks, the Bank expanded
its pilot of "Deposit MICR" services, adding a sizable financial
institution with subsidiary banks in the Portland and Seattle zones
to its customer base. The Bank's pilot of deposit MICR services
includes the capture, sorting and imaging of transit and "on us"
checks, as well as "proof of deposit" type services and item encoding.
By enabling financial institutions to eliminate back office operations
associated with handling paper items, these services make electronic
check collection much more economical for financial institutions,
particularly when they also provide images of paid items in their
customers' monthly account statements in lieu of returning the physical
In order to provide higher levels of service and operate more efficiently
through enhanced automation platforms, we continued to lead the
Enterprise-wide Check Adjustments (EWA) project for the System.
This application is the largest distributed processing application
in the Federal Reserve. It will provide improved cross-District
adjustments processing capabilities, as well as a platform for Web-based
submission and tracking of cases, resulting in better efficiency
in back room operations and enhanced services to both local and
From left (standing):
Gordon R.G. Werkema, Executive Vice President, Northern Region;
Raymond H. Laurence, Senior Vice President-in-Charge, Portland;
Mark Mullinix, Senior Vice President-in-Charge, Los Angeles
Andrea P. Wolcott, Vice President-in-Charge, Salt Lake City
The Bank contributes to the formulation of sound monetary and regulatory
policy through academic research on topics of policy concern to
the Federal Reserve, timely and high-quality data reporting, and
outreach to increase the public's understanding of the Federal Reserve
as the nation's central bank.
Research efforts in 1999 were concentrated in three key areas:
structural change in the economy and the conduct of monetary policy,
financial crises in emerging-market economies, and financial services
industry restructuring and supervisory policy.
The Bank's Center for Pacific Basin Monetary and Economic Studies
hosted an international conference on the theme "Financial Crises
in Emerging Markets." The event brought together nearly 100 researchers
and policymakers from foreign central banks, international organizations,
academia, and the Federal Reserve to discuss the role of the financial
sector in the occurrence of banking and currency crises in emerging
market countries, particularly in Asia.
Banking Supervision and Regulation
In addition to handling successfully its Y2K-related supervisory
responsibilities, the Bank's supervision function continued to focus
on emerging risks, particularly in the supervision of large, complex
banking organizations (LCBOs). In this regard, we deepened our expertise
in global bank supervision, the supervision of new information technologies
used in the delivery of financial services, and credit risk modeling
techniques used by financial institutions. We also enhanced our
Asia supervision program and our reputation as a leading expert
in Asia. We continued to strengthen our safety and soundness and
compliance supervisory programs for regional and community banking
organizations by focusing on ongoing monitoring of, and outreach
to, our supervised entities. In this matter, we were able to address
emerging issues in a timely, cooperative manner.
In the Community Affairs area, the Bank continued to develop innovative
outreach programs and to promote partnerships between financial
institutions and community groups, focusing particularly on increasing
the availability of credit to tribal lands. In this regard, the
Bank convened and facilitated 25 meetings for bankers and tribal
representatives on various Indian reservations in the Pacific Northwest,
Idaho, and Utah. These gatherings have resulted in several financial
institutions developing tribe-specific partnerships with loan commitments
for mortgage and commercial lending on tribal lands.