Less than a year after the Federal Reserve Bank of Boston agreed to conduct a coast-to-coast study on ways to improve and streamline the nation's payment systems, Boston Fed president Cathy Minehan unveiled the changes Thursday. She said the Fed will close 13 check-processing operations and 31 check-adjustment operations -- the latter of which handle processing errors -- by the end of 2004.
Approximately 1,300 Fed employees are expected to lose their jobs as part of the reorganization. But Minehan said another 900 jobs are likely to be created at sites that add to their workload because of the consolidation, so the net loss will be around 400 positions nationwide.
It was unclear yesterday how many employees would be affected in Boston, which will close its check-adjustment facility and move the service to Windsor Locks, Conn. The Fed said it would maintain service in every region despite the cutbacks.
''Nationwide, consumers and businesses have made a significant shift in how they make payments, substituting electronic payments for checks,'' Minehan said in a statement. ''This development is good news for the nation's payment system, and the Federal Reserve has strongly supported this shift. But declining check volumes are requiring the Reserve Banks to make changes in their check operations to address the challenges posed by the changing market.''
The Fed, which operates as the country's de facto central bank, reported that 60 percent of non-cash retail transactions are done with paper checks today, down from 85 percent in 1979. It said that roughly 40 billion checks were written in the country last year, down from 50 billion in 1995.
Tom Lavelle, spokesman for the Boston Fed, said most bank customers won't notice any change and that the agency's goal is to keep ''deposit times and availability as close to the current service levels as possible.''
Lavelle said the streamlining effort will began in the second half of this year and continue through 2004.
In its announcement, the Fed reported that ''mainly because of declining check volumes,'' its own financial performance had suffered over the past year. The Federal Reserve System's after-tax return on equity dropped to 4.2 percent in 2002, from an average of 12.2 percent over the previous decade, and that it expects to post a loss this year.
As a result of the streamlining, the Fed said it expects to slash operating costs by $300 million over the next five years.