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BOSTON-As `streamlining’ has become the buzzword of the day, and many federal regulators are cutting jobs for the sake of efficiency, the Federal Reserve Banks announced major cuts to their check processing operations. The move to streamline their check management structure, reduce staff, decrease the number of check-processing locations, and increase processing capacity in other locations reflects the general ongoing shift from paper checks to electronic payments. NAFCU Chief Economist Tun Wai explained that while some people, such as himself, will continue to write checks, many technology-savvy Americans are moving toward online bill payment and debit cards. He said he believes much of the decline in check usage is a generational matter, adding that the trend is making check printers and other related companies nervous. While checks remain the most popular noncash retail payment for now, they only account for 60% of all noncash retail payments currently as opposed to 85% in 1979. The Fed estimated that approximately 40 billion checks were written in the U.S. in 2002, down from 50 billion in 1995. The Reserve Banks handle about 17 billion of those checks each year, a number that is also expected to decline. Four hundred check service jobs, or about 8%, will be eliminated in the process, but a total of nearly 1,300 positions will be affected. Some opportunities for reassignment will be available and some staff reductions will occur through attrition, but the number of involuntary separations is unclear at this time, according to the Fed. The proposed changes should reduce the Fed’s operating costs for check services by about $60 million in 2005 and about $300 million over the next five years. Additionally, the Fed’s check processing will be done at 32 sites, down from 45, and check-adjustment functions, where check processing errors are resolved, will be performed in 12 as opposed to 43 locations. CUNA is keeping a watchful eye over the reductions, according to the organization’s Associate General Counsel Mary Dunn. She pointed out that six years ago, the Fed completed a study on the payments process and determined at that time that its check clearing system was “thought to be very important to smaller institutions.” However, regardless of usage, CUNA feels a competitor in the marketplace for all entities, including corporate credit unions, is a good thing. “I think this can be a very positive thing in terms of the corporates, and in terms of working with them,” Dunn commented. “We also want to make sure, however, that there always is a competitive outlet for credit unions, whatever they choose to use for the servicing of their payments.” Wai said simply, “These are cost cutting measures on the part of the Fed and I trust the Fed.” He added he does not expect to see any decline in service and, therefore, does not foresee a rush to corporate credit union services. Federal Reserve Bank of Boston President and CEO Cathy Minehan, chair of the Reserve Banks’ Financial Services Policy Committee, reassured, “The Federal Reserve Banks are committed to remaining a leader in providing payment services, including check processing. Adjusting our operations to respond to changes in the marketplace will position the Banks to continue to fulfill this role.” The Fed is working to continue check services nationwide while maintaining similar deposit times and availability as currently provided in the affected markets. -

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