Full text of Annual Report of the Federal Reserve Bank of Boston : 2018 Annual Report : 2018 Annual Report

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Public Service That Makes a Difference®

2018
Annual Reports

Looking back at 2018: Eric S. Rosengren,
President & CEO, and Kenneth C.
Montgomery, First Vice President & COO
March 22, 2019

The Federal Reserve Bank of Boston is pleased to release audited financial
statements for 2018, along with a brief overview of the ways in which the
Reserve Bank has had an impact on the regional and national economy this
past year.
This year’s financial statements show that the Boston Fed remitted $1.35
billion to the U.S. Treasury—part of the $65.3 billion the Federal Reserve
System as a whole remitted to the U.S. Treasury during 2018. Every year,
the Federal Reserve remits excess earnings to the U.S. Treasury after
expenses, dividends, and reservation of an amount to maintain surplus.

Impact: Policy
In 2018, Boston Fed economists and analysts explored issues that pose
latest information
both major challenges to local communities in our region and are atOur
the
on COVID-19
center of national economic debates—including the fiscal impact of the

opioid crisis in the New England states, the supply of housing for the
chronically homeless in Massachusetts, and participation in the gig
economy.
At the Reserve Bank’s annual economic conference in September,
participants discussed the consequences of long spells of low interest rates.
A Boston Fed research team also studied whether the Federal Reserve
should regularly review the ways policymakers conduct monetary policy,
including its goals, instruments, targets, and other facets. Their findings
were published in the fall edition of the Brookings Papers on Economic
Activity and helped shape the “Fed Listens” initiative taking place in 2019.
Throughout 2018, Boston Fed President Eric Rosengren was an influential
voice among U.S. monetary policymakers as a contributing member of the
Federal Open Market Committee. In more than 15 public talks, Rosengren
offered his insight on the national and global economy, the ethics and
economics of lessening the severity of economic downturns, and
perspectives on revitalizing New England’s post-industrial cities, among
other topics.

Impact: Communities
The Boston Fed made a community impact in 2018 by expanding to new
geographies and introducing new policy priorities. The Reserve Bank’s
Working Cities Challenge continued its work in Massachusetts, Rhode
Island, and Connecticut, helping post-industrial cities address chronic
challenges like poverty, workforce development, and affordable housing.
Now we’re adapting the model to address issues in more rural areas. In the
coming months, we’re planning to expand the challenge to New England’s
northern region.
In the fall, the Boston Fed took eight Federal Reserve presidents from
across the country to the Working City of Lowell, Mass., to demonstrate the
power of cross-sector collaboration and the ways it could help communities
in their districts. We also partnered with Living Cities philanthropic
collaborative to convene more than 300 representatives from a range of
public, private, philanthropic, and nonprofit entities—including
representatives from six Reserve Banks and the Federal Reserve Board of
Governors—for a forum designed to surface strategies and partnerships to
increase economic opportunity and mobility for struggling Americans.

The Boston Fed sharpened its focus on increasing the quality of jobs, so
fewer fulltime workers struggle to meet basic needs. As part of that
initiative, community development staff hosted “Raising the Floor:
Strategies that Make Jobs Work for All,” a conference that drew
businesses, academics, nonprofits, and public sector representatives to
explore the challenges and opportunities associated with providing better
quality jobs to residents.
The Reserve Bank also considered the ways technology can help
underserved populations get more access to banking and financial services.
Bank experts believe there are answers in FinTech that can improve the
economic health of individuals and, by extension, their communities.

Impact: Federal Reserve System
We were out front on a number of initiatives that span the Federal Reserve
System, including efforts on behalf of the Fed to build an increasingly
secure U.S. payments system in collaboration with payments industry
stakeholders. In 2018, a team of Boston Fed payments experts established
a comprehensive overview of payments fraud in the United States and
prioritized actions to improve payments security.
The Boston Fed also continued to lead explorations of emerging
technologies that could impact not just the Fed, but the entire financial
system. We’re deeply involved in testing the capabilities of blockchain so
we can understand its true potential, and experimenting with and identifying
use cases for robotic process automation.
The Bank continued to deliver on System-level responsibilities. We
performed services on behalf of the U.S. Treasury Bureau of Fiscal Service
through our stored value card program, which provides offline smart cards
for military personnel. We conducted research and analysis on the evergrowing mobile financial services field; directed financial management
strategies, operations, and support for the Federal Reserve System; and
contributed to advancing the resiliency of systemically important financial
firms.

Impact: Diversity & Inclusion
As part of the Boston Fed’s ongoing effort to build an increasingly diverse

workforce and promote a culture that engages and empowers employees,
last year the Bank increased gender and ethnicity diversity on the board of
directors, advisory councils, and among officers of the Bank. What’s more,
the organization doubled-down on efforts to bring more women and minority
candidates into the hiring pipeline by appointing an employee recruiter
specifically focused on diversity. Lastly, nearly 40 percent of employees
participated in employee resource groups that are designed to celebrate the
Bank’s diverse workforce and community partnerships.

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We are proud that the Boston Fed had a strong year in 2018 serving the
public interest. Our work as part of the U.S. central bank takes vigilance
and constant innovation, a deep commitment to local communities, and a
willingness to take the right risks to achieve the Boston Fed vision. We’re
grateful to our Bank colleagues and regional stakeholders. They support
our vision and help us achieve it.
Sincerely,
Eric S. Rosengren
President and CEO

Kenneth C. Montgomery
First Vice President and COO

Financial Statements
Federal Reserve Bank of Boston Financial Statements
Federal Reserve Banks Combined Financial Statements
The Federal Reserve Board engaged KPMG to audit the 2018 combined
and individual financial statements of the Reserve Banks.1
In 2018, KPMG also conducted audits of internal controls over financial
reporting for each of the Reserve Banks. Fees for KPMG services totaled
$7.0 million. To ensure auditor independence, the Board of Governors
requires that KPMG be independent in all matters relating to the audits.
Specifically, KPMG may not perform services for the Reserve Banks or
others that would place it in a position of auditing its own work, making
management decisions on behalf of the Reserve Banks, or in any other way
impairing its audit independence. In 2018, the Bank did not engage KPMG
for any non-audit services.

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Endnotes
1. In addition, KPMG audited the Office of Employee Benefits of the Federal Reserve System (OEB), the
Retirement Plan for Employees of the Federal Reserve System (System Plan), and the Thrift Plan for
Employees of the Federal Reserve System (Thrift Plan). The System Plan and the Thrift Plan provide
retirement benefits to employees of the Board, the Federal Reserve Banks, the OEB, and the Consumer
Financial Protection Bureau.