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Federal Reserve Bank of Dallas
2200 N. PEARL ST.
DALLAS, TX 75201-2272


April 4, 2003

Notice 03-19

TO: The Chief Operating Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District

Information on Check Infrastructure Changes
In early February, the Federal Reserve Banks announced changes to our back-office
check processing and adjustments operations, including a reduction in the number of check
processing locations nationwide. We are making these changes in response to the challenges
posed by the changing market, including the decline of check volumes industrywide. As the
industry evolves, we will adapt to remain competitive and to focus on creating value for you.
You may or may not be directly affected by our infrastructure changes, but we
wanted to address some of the questions we have received in case they are of interest. Though
we do not have all the specifics at this time, in the coming weeks and months we will share
details with you as decisions are made. Please be assured that we intend to deliver the same
integrity, reliability, and high level of service you have come to expect.
Throughout this period of change, we remain committed to the following:
1) Continuing to provide you with high-quality service, even if locations change.
To improve our ability to recover operating costs while maintaining high-quality,
cost-effective services, the Federal Reserve Banks are reducing the number of

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

-2check processing locations nationwide from 45 to 32 and are streamlining check
adjustments sites in 12 locations. These changes are expected to begin in late
2003 and conIåude by the end of 2004.
2) Remaining a nationwide provider of check clearing services without exiting
any markets.
In fact, the changes we recently announced are intended to enable the Reserve
Banks to remain a financially viable provider of check services for years to come.
This commitment is consistent with the 1998 report by the Committee on the
Federal Reserve in the Payments Mechanism. We expect to explore further
changes as we continue to evaluate environmental and market conditions over the
coming years.
The Federal Reserve Banks decided to restructure check operations in response to
declining check volumes industrywide and other factors affecting our ability to
recover direct and imputed costs for payment services. The changes we are
making are not a reaction to the proposed Check Clearing for the 21st Century
(Check 21) legislation. Check 21 legislation and other industry initiatives, such as
lockbox and point-of-purchase truncation, will likely further erode already
declining check volumes. As a result, we believe that enhancing our efficiency is
an important prerequisite to our continued provision of cost-effective paper and
electronic check services.
3) Minimizing any impact on you.
In cities where check processing is being moved into another location, deposit
times and availability will stay as close to current service levels as possible. A
drop-off point will be established in each of the cities where checks will no longer
be processed, and the Federal Reserve will assume responsibility for transporting
cash letters from the drop-off point to the processing location. In addition, we will
continue to accept cash letters with the same sorted endpoints.
4) Leveraging our investments in technology to offer robust services.
We will continue to review and adjust our product offerings based on your needs
and the needs of the overall financial services marketplace. New check imaging
and check adjustments technology, combined with the new standard processing
platform we are implementing, will enable us to maintain the high quality of
check services offered to all our customers.
5) Communicating with you on an ongoing basis.
In the future—and especially during the next three months—we will keep you
informed as more detailed information relating to individual markets becomes
available. In affected markets, we will notify all customers at least 120 days

-3before we transition the processing of cash letters to an alternate processing
location to provide financial institutions with sufficient time to modify their
internal procedures, if necessary.
We will be in touch regularly, and we look forward to talking with you in the coming
months. In the meantime, for up-to-date information, visit Also, you may
contact one of this Bank’s account executives listed below:
Rick Flansburg
Michele Hitchings
Jim McCammon
Susan Vice
Kathy Waggoner

(210) 978-1661
(713) 652-9141
(214) 922-5491
(214) 922-5430
(713) 652-9146

Paper copies of this notice or previous Federal Reserve Bank notices can be
printed from our web site at

Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102