Final Report of the Committee on the Federal Reserve in the Payments Mechanism
January 14, 1998
Circular No. 11018

To All Depository Institutions and Others Concerned in the Second Federal Reserve District:

The following is from a statement by the Board of Governors of the Federal Reserve System:

The Federal Reserve has issued the final report and recommendations of its Committee on the Federal Reserve in the Payments Mechanism.

The Committee was appointed by Chairman Alan Greenspan in October 1996 to examine the payment services provided by the Federal Reserve to depository institutions in recognition of the rapid changes occurring in the financial services and technology sectors.

The Committee came to two general conclusions which are discussed in detail in its full report:

  • The Federal Reserve should remain a provider of both check collection and automated clearing house (ACH) services with the explicit goal of enhancing the efficiency, effectiveness and convenience of both systems, while ensuring access for all depository institutions.
  • The Federal Reserve should play a more active role, working closely and collaboratively with providers and users of the payments system, both to enhance the efficiency of check and ACH services and to help evolve strategies for moving to the next generation of payment instruments.

In reaching its conclusions the Committee undertook a fundamental review of the role of the Federal Reserve in the payments system and considered how alternative roles for the Federal Reserve might enhance or undermine the integrity, efficiency and accessibility of the payments system.

The review involved a series of payments system forums held around the country to receive views of representatives from over 450 institutions, including depository institutions of all sizes, clearing houses and other third-party service providers, consumers, retailers, and academics.

Discussions at these meetings focussed on five hypothetical scenarios depicting various alternative roles of the Federal Reserve, ranging from exiting the retail payments system to adopting a leadership role in the industry.

The Committee is comprised of Vice Chair Alice M. Rivlin as Committee Chair, Governor Edward W, Kelley, Jr., President William J. McDonough of the Federal Reserve Bank of New York, and President Thomas C. Melzer of the Federal Reserve Bank of St. Louis.

A copy of the Committee's final report and recommendations is available as a (pdf) file (pdf - 452kb). Questions may be directed to Beverly J. Hirtle, Vice President of our Banking Studies Function.