Kansas City Fed to downsize

Northwestern Financial Review, Mar 15-Mar 31, 2003

In conjunction with other Federal Reserve Banks throughout the nation, the Federal Reserve Bank of Kansas City is closing its check-processing operation and will move its Omaha, Neb., branch office to Des Moines and its check-adjustment activity to Detroit. The changes, which will be implemented in the first half of 2004, will affect more than 50 employees at the branch. The Fed said it does not yet know how the changes will affect banks.

"The Federal Reserve System faces the difficult task of controlling costs in its check operations as volumes decline," said Thomas M. Hoenig, president, Federal Reserve Bank of Kansas City. "We have outstanding employees, and I want to be clear that the decision to close the Omaha check operation was one that was necessitated by the national situation."

The announcement comes as part of a plan to restructure check-processing operations nationwide to provide greater efficiencies. In recent years, the number of checks written has declined, as more people have shifted to electronic payment methods. Because the number of checks being processed and revenue from this business has decreased, it is more difficult for the Federal Reserve Banks to meet the financial requirements of the Monetary Control Act of 1980. That act requires the Federal Reserve Banks to set prices to recover, over the long run, their total costs of providing payment services to depository institutions.

To make the check operations more efficient, part of the restructuring plan calls for reducing check-processing sites to 32 from 45 and check adjustments sites to 12 from 43. As a result of the restructuring, the Federal Reserve Banks will reduce their overall check staff by slightly more than 400 positions. In the offices where check processing will be eliminated, almost 1,300 positions will be affected.

"The Omaha branch and its employees have been asked to play a different role in the Federal Reserve System, and we will do so to meet the needs of the system and the depository institutions it serves," said Steve Evans, vice president and branch manager of the Fed's Omaha branch. "But it is with great sadness that we will move into this next phase without our entire team. I am proud of the dedicated, hardworking staff in our check operations here, and we will do all we can as an organization to help employees through this transition."

In addition to its check processing operation, the Omaha branch provides cash services, bank supervision, regional input to monetary policy decisions, and support staff related to these functions.

The Federal Reserve Bank of Kansas City has approximately 1,600 employees with responsibility for a seven-state area.