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Annual Report 1987
F E D E R A L

R E S E R V E

B A N K

O F

R IC H M O N D




F e d e r a l

R e s e r v e

B a n k

o f

S e v e n t y - T h ir d A n n u a l R e p o r t
3

R ic h m o n d
1987

M e s s a g e fr o m th e C h a ir m a n
a n d th e P r e s id e n t

4

M o n e ta ry P o lic y

5

S u p e r v is io n a n d R e g u la tio n

6

F in a n c ia l S e r v ic e s

7

E l e c t r o n i c P a y m e n t s in R e t r o s p e c t

14

D ir e c to r s

16

A d v is o r y C o u n c ils

17

O ffic e r s

18

O p e r a t i n g a n d F i n a n c i a l S t a t i s t ic s




ISSN 0164-0798
LIB R A R Y O F C O N G R E S S C A T A L O G C A R D NUM BER:

16-7264

Additional copies ol this Annual Report may be obtained without charge from:
P u b lic Services D epartm ent




Federal Reserve Bank of R ich m o n d

P. O . Box 27622

R ich m o n d , V irg in ia

23261

M e s s a g e

fr o m

th e

C h a ir m a n

a n d

th e

P r e s id e n t

------------- J

_

F e d e r a l R e s e r v e S y ste m . In " E l e c ­
t r o n ic P a y m e n ts in R e t r o s p e c t ,"
S e n io r

V ic e

P r e s id e n t

B ru ce

S u m m e r s e x a m in e s th e p a tte r n
■p

,

a n d e x te n t o f u s e o f e l e c t r o n i c

-------- --

f u n d s tra n s fe rs a n d c h a r ts a c o u r s e
^.

j
••
*

■

V

..

1

fo r th e ir fu tu re.

.

T h r e e s h o r te r a r t ic le s c o m p l e t e

-

th e te x tu a l p o r t i o n o f th e r e p o r t.
T w o— o n e o n fin a n c ia l s e r v ic e s
a n d o n e o n s u p e r v is io n a n d r e g u ­

f x

i
.

la t io n — fo c u s o n th e a p p li c a t io n

jSSSriji in
*

o f e l e c t r o n i c t e c h n o l o g y to B a n k

/
/
Y

/

fu n c t io n s . T h e th ir d p r e s e n ts a
r e v ie w o f m o n e t a r y p o l i c y in 1987,

"jjk m m m m
*

j m

*1

III
m

i

a y e a r that h e ld a n u n u s u a l m ix ­

;J
i t . ”

> t

tu r e o f c h a l l e n g e s fo r S y stem
p o li c y m a k e r s . W e h o p e that y o u
w ill fin d th e a r t ic le s in te r e s t in g
a n d in fo r m a tiv e .

Robert P. Black
President




Leroy T. Canoles, Jr.
Chairm an o f the Board
O n b e h a lf o f o u r d ir e c t o r s a n d
sta ff, w e w is h to th a n k y o u fo r th e
e a r e p l e a s e d to p r e s e n t
th e 1987 A n n u a l R e p o r t

co o p e r a tio n a n d su p p ort you e x ­
t e n d e d to u s t h r o u g h o u t th e y ea r.

o f th e F e d e r a l R e s e r v e
B a n k o f R ic h m o n d . T h is y e a r w e
fe a t u r e a n a r t i c le o n e l e c t r o n i c
p a y m e n ts . F or th e p a st fiv e y e a r s
at th e F e d e r a l R e s e r v e B a n k o f
R ic h m o n d , a s p e c ia l p la n n in g a n d

C h a ir m a n o f th e B o a r d

m a n a g e m e n t u n it h e a d e d b y First
V i c e P r e s id e n t J im m ie M o n h o l lo n
has

d ir e c t e d

d e v e lo p m e n t s

in

e l e c t r o n i c p a y m e n ts fo r th e e n tir e

P r e s id e n t

3

M o n e ta ry

A

P o lic y

d ir e c t ly o n a n u m b e r o f o t h e r

s 1987 b e g a n a n d a s it

i n d ic a t o r s i n c l u d i n g in fla tio n ,

p r o g r e s s e d , th e F e d e r a l

e c o n o m i c c o n d i t i o n s , a n d th e e x ­
R e s e r v e f a c e d th e c o n c h a n g e rate.
­
t in u in g c h a l l e n g e o f p r o v i d i n g
■

e n o u g h lig u id it y to s u p p o r t a fifth

T h r o u g h m o s t o f th e y e a r, th e

y e a r o f e c o n o m i c e x p a n s i o n w ith ­

S y s te m s o u g h t to m o d e r a t e a r is e

o u t r is k in g a n i n c r e a s e in in fla ­

in in fla t io n e x p e c t a t i o n s th at w a s

t io n a r y p r e s s u r e s . A s in o t h e r

a p p a r e n t ly t r i g g e r e d b y in c r e a s e s

r e c e n t y e a r s , th is ta sk w a s c o m p l i ­

in c o m m o d i t y p r i c e s a n d d e c l i n e s

c a t e d b y u n c e r t a in t y o v e r h o w

in th e f o r e i g n e x c h a n g e v a lu e o f

d e r e g u la t i o n in b a n k in g m a r k e ts

t h e d o lla r . T h e s e e x p e c t a t i o n s in ­

h a d d is t o r t e d r e la t io n s h ip s b e ­

t e n s if ie d in la t e s u m m e r , a n d o n

tw e e n th e m o n e t a r y a g g r e g a t e s

S e p t e m b e r 4 th e F e d e r a l R e s e r v e

a n d e c o n o m i c a c tiv ity . B e c a u s e o f

r a is e d th e d is c o u n t ra te fr o m 5!/2

th is u n c e r ta in ty , th e F e d e r a l O p e n

Senior Vice President A1 Broaddus reports
on economic conditions in the aftermath
o f the stock market plunge.

to 6 p e r c e n t in o r d e r " t o d e a l

M a rk e t C o m m it t e e d i d n o t se t a n

e f f e c t iv e l y a n d in a t im e ly w a y

T h e p r im a r y c o n c e r n o f p o l i c y

a n n u a l ta r g e t r a n g e fo r th e M l

w ith p o t e n t ia l in fla t io n a r y p r e s ­

s h ift e d a b r u p t ly in O c t o b e r f o l ­

a g g r e g a t e . T h e C o m m it t e e d i d

s u r e s ." T h is in c r e a s e w a s th e first

lo w in g th e r e c o r d p l u n g e in th e

set a n n u a l ta r g e t r a n g e s fo r th e

s in c e M a rch 1984.

s t o c k m a r k e t. In th e a fte rm a th o f

b roa d er M 2 an d M 3 a g g re g a te s,

th e c r a s h , th e F e d e r a l R e s e r v e

b u t in m a k in g its m o n t h -t o -m o n t h

a ff ir m e d " it s r e a d in e s s to s e r v e

p o l i c y d e c i s i o n s it a ls o f o c u s e d

a s a s o u r c e o f li g u i d it y to s u p p o r t
th e e c o n o m i c a n d fin a n c ia l s y s ­

3 0 -Y E A R T R E A S U R Y B O N D Y IE L D

te m ," a n d th e f i n a n c i a l sy ste m s u r ­

(Weekly: January 2, 1987 to December 25,1987)

v iv e d w ith o u t m a jo r d is lo c a t io n s .
T h e g o a l o f c o n t i n u e d e x p a n s io n
in 198 7 w ith o u t a s ig n ific a n t r is e
in th e in fla t io n r a te p r o v e d to b e
a n a t t a in a b le o n e . T h e e c o n o m y
g r e w at a ra te o f a b o u t 4 p e r c e n t ,
w e ll a b o v e th e c o n s e n s u s fo r e c a s t .
T h e p r i c e le v e l r o s e b y a p p r o x i ­
m a t e ly 3^2 t o 4 p e r c e n t . In d u s tr ia l
p r o d u c t i o n , w h i c h h a d b e e n v ir ­
tu a lly fla t in 1 9 8 5 a n d 1986,
c lim b e d b y r o u g h ly 5 p e rce n t. A s
th e y e a r c a m e to a c lo s e , h o w e v e r,
th e r e

JA N

FEB M A R A P R

MAY

JU N

JU L

AUG

SEP

OCT

N O V DEC

r e m a in e d

an

u nu su al

a m o u n t o f u n c e r t a in t y o v e r th e
c o u r s e o f th e e c o n o m y in th e

Concern over the possibility of a resurgence in inflation was especially evident in bond
yields; which rose sharply in the spring and again in the late summer and early fall.

4



m o n th s to c o m e .

S u p e r v is io n

a n d

R e g u la tio n

t w as n ot to o m an y years a g o

lo a n d o c u m e n t a t i o n a n d p a r e n t

th at it w a s c o m m o n fo r a

I

h o l d i n g c o m p a n y c a s h flo w a n a ly ­

b a n k 's g e n e r a l b o o k s to b e

sis, b u t la t e ly n o s u b je c t h a s b e e n

kept o n a h a n d -p o s te d "B o sto n

e m p h a s iz e d m o r e th a n th e u s e o f

L e d g e r ," a n d fo r th e n o is e o f a n

p e rso n a l com p u ters.

e a r ly m o d e l p r o o f m a c h in e to b e
th e m o s t t a n g i b l e e v i d e n c e o f

N ot t o o m a n y y e a r s a g o , e x ­

t e c h n o l o g i c a l p r o g r e s s . E x a m in e r s

a m in e r s c a r r i e d la r g e b r ie f c a s e s

c o u l d e a s il y t r a c e th e p r o g r e s s io n

b u l g i n g w ith w o r k p a p e r s w h e n

o f ite m s t h r o u g h fa ir ly e le m e n t a r y

th e y e n t e r e d a b a n k . Today, at

a c c o u n t i n g s y ste m s. T oday, th e

le a st o n e e x a m in e r c a r r ie s a p e r ­

s u b d u e d h u m o f a c o m p u t e r 's
c e n t r a l p r o c e s s i n g u n it is
e v i d e n c e o f a d r a s tic c h a n g e th at

s o n a l c o m p u t e r . T h e c o m p u t e r is
Intensive, inform al training sessions help
novice examiners develop necessary skills.

u s e d to e n te r , a n a ly z e , rev iew , a n d
e d it d a ta . In m a n y in s ta n c e s , th e

h a s o c c u r r e d in th e w a y b a n k s

e x a m in a t io n r e p o r t is p r in t e d o n ly

k e e p u p w ith tr a n s a c tio n s .

F orm al s c h o o ls a re s p o n s o r e d b y

w h e n it is c o m p l e t e d a n d r e a d y

th e B o a r d o f G o v e r n o r s a n d th e

fo r m a ilin g .

T h e s c o p e o f c h a n g e h a s g o n e fa r

F e d e r a l F in a n c ia l In s titu tio n s

b e y o n d a u t o m a t io n o f a c c o u n t s .

E x a m in a tio n C o u n c i l (F F IE C ).

In 1 9 8 8 , th e F F IE C w ill e n c o u r a g e

In te re st ra te s h a v e b e e n d e r e g ­

G r a d u a t e s c h o o l s o f b a n k in g a n d

b a n k s to s u b m it th e ir r e p o r ts o f

u la t e d , n e w s e r v ic e s h a v e b e e n

s c h o o l s s p o n s o r e d b y sta te b a n k ­

c o n d i t i o n e le c t r o n i c a ll y . It is

a d d e d , b a n k s th at w e r e o n c e in ­

in g a s s o c ia t io n s a r e a ls o u s e d e x ­

p o s s i b l e th at e x a m in a t io n r e p o r ts

d e p e n d e n t u n its h a v e b e c o m e

te n s iv e ly . D u r in g 1 9 8 7 , a p p r o x i ­

w ill s o m e d a y b e s e n t to b a n k s in

m a t e ly t h r e e -fo u r t h s o f th e f i e ld

th e s a m e fa s h io n .

h o l d i n g c o m p a n y a ffilia te s .

e x a m in in g fo r c e a tte n d e d o n e or
H o w d o e x a m in e r s k e e p a b r e a s t ?

m o r e o f th e s e fo r m a l s c h o o ls , a n d

T h e r e is n o e a s y a n sw e r, b u t

s e n io r p e r s o n n e l s e r v e d as i n ­

tw o k e y w o r d s a r e t r a in in g a n d ,

s t r u c to r s in s e v e r a l. In a d d it io n ,

a u to m a t io n .

th e E x a m in in g D e p a r t m e n t c o n ­
d u c t e d tw o b a n k h o l d i n g c o m p a n y

O n - t h e - j o b t r a in in g r e m a in s th e

s c h o o l s at state b a n k in g d e p a r t ­

fo r e m o s t t e a c h e r , fo r th e r e is n o

m e n t o f f i c e s fo r jo in t u s e b y

s u b s titu te fo r e x p e r i e n c e g a i n e d

sta te e x a m in e r s a n d d e p a r t m e n t

in th e fi e ld . T h e r a p id ly c h a n g i n g

p e r s o n n e l.

b a n k in g e n v ir o n m e n t o f to d a y ,
h o w e v e r , n e c e s s it a t e s a c o m p r e ­

E d u c a t io n is a ls o p r o v i d e d o n a

h e n s iv e a n d fo r m a l tr a in in g p r o ­

c o n t in u o u s b a s is b y in fo r m a l d e ­

g r a m fo r b o t h n e w a n d e x p e r i ­

p a r tm e n ta l t r a in in g s e s s io n s . S u b ­

e n c e d e x a m in e r s .

je c t s c o v e r e d a r e as d iv e r s e as




The personal com puter is a valuable ad­
junct to both field examinations and office
analytical work.

5

I

F in a n c ia l

S e r v ic e s

T h e B a n k 's C u s t o m e r S u p p o r t
D e p a r t m e n t h a s a staff d e d i c a t e d
to s u p p o r t u s e r s o f o n - l i n e s e r ­
v ic e s . Its m e m b e r s tra in n e w
u s e r s , a n s w e r g u e s t io n s , a n d h e lp
s o lv e p r o b le m s . T h is g r o u p ta k e s
p r i d e in b e i n g r e s p o n s iv e to u s e r
g u e s t io n s a n d s e n s it iv e to n e w
s e r v ic e n e e d s . C u s to m e r S u p p o rt
h o ld s a n n u a l u s e r g r o u p m e e t in g s
at v a r io u s lo c a t io n s in th e D is tr ic t
to g i v e o n - l i n e u s e r s th e o p p o r ­
tu n ity to e x c h a n g e id e a s , p r o v i d e
f e e d b a c k c o n c e r n i n g s e r v ic e s ,
a n d le a r n a b o u t fu tu r e p la n s .
A w id e r a n g e o f s e r v i c e s is a v a il­
Group meetings foster the exchange of ideas and information between the users of Federal
Reserve on-line services and members of the Customer Support staff.

a b l e to o n - l i n e c u s t o m e r s , a n d
e a c h s e r v i c e w a s d e v e l o p e d w ith
th e h e lp o f th e fi n a n c i a l in stitu ­
tio n s th e m s e lv e s . T h e O p e r a t io n s

le c t r o n i c s a n d t e l e c o m m u n i ­

b y w ay of p e rso n a l co m p u te rs a n d

A d v i s o r y C o m m it t e e , m a d e u p o f

c a t i o n c o n t in u e to p la y in ­

o r d in a r y t e l e p h o n e lin e s . A p p r o x i ­

r e p r e s e n ta tiv e s o f f in a n c ia l in stitu ­

c r e a s i n g l y la r g e r o le s in th e

m a t e ly 3 0 0 fin a n c ia l in s titu tio n s

tio n s t h r o u g h o u t th e Fifth D is trict,

F e d e r a l R e s e r v e 's p r o v is io n o f

w ere F O X u sers b y y e a r -e n d 1987.

p la y s a k e y r o le in th e d e s i g n o f

safe, s o u n d , a n d e f f ic ie n t s e r v ic e s

A n a d d it i o n a l 100 in s titu tio n s that

s e r v ic e s . T h r o u g h th e ir c o m m e n t s

that a r e r e s p o n s iv e to c u s t o m e r

c u r r e n t ly u s e u n in t e llig e n t t e r m i­

at m e e t in g s a n d t h e ir p a r t i c i p a ­

n e e d s . In 1987 , th e th ru st w a s o n

n a ls fo r fu n d s a n d s e c u r it ie s tr a n s ­

tio n in m a rk e t r e s e a r c h su rv e y s,

im p r o v in g th e t e c h n o l o g y fo r p r o ­

fe r s w ill h a v e c o n v e r t e d to p e r ­

m e m b e r s o f th is c o m m it t e e p r o ­

v id i n g o n - l i n e s e r v ic e s , a n d o n

son a l c o m p u te r t e c h n o lo g y b y

v i d e v a lu a b le a id in id e n t ify in g

d e v e l o p i n g m a jo r n e w s e r v i c e

e a r ly 1 988. N ow , m a n y s m a lle r

s e r v i c e n e e d s a n d im p r o v e m e n t s .

o ff e r in g s .

in s titu tio n s c a n jo i n th e la r g e r ,
h ig h - v o lu m e b a n k s th at u s e d ir e c t

W h e t h e r it's a fu n d s o r s e c u r it ie s

T h e F e d e r a l R e s e r v e p r o v id e s o n ­

c o m p u te r -t o -c o m p u te r c o n n e c t io n s

tra n sfe r, in fo r m a t io n r e la t e d to

lin e s e r v i c e s b y m e a n s o f th e F O X

to o b t a in th e c o n v e n i e n c e , t i m e li­

c h e c k p re se n tm e n t o r ca sh d e ­

(F e d O n l i n e X c h a n g e ) sy s te m ,

n e s s , e f f ic ie n c y , w id e r r a n g e o f

p o s it s o r o r d e r s , a c c o u n t b a l a n c e

w h ic h tra n sm its p a y m e n ts a n d in ­

s e r v ic e s , a n d g r e a t e r s e c u r it y

in g u ir ie s , o r r e p o r t o f t r a n s a c ­

fo r m a t io n b e t w e e n th e F e d e r a l

o f f e r e d b y o n - li n e s e r v ic e s .

tio n s — it's a ll a v a il a b le o v e r th e

R e s e r v e a n d f in a n c ia l in s titu tio n s

6




F e d e r a l R e s e r v e 's o n - l i n e n e tw o r k .

E le c tr o n ic

P a y m e n ts

in

R e tr o s p e c t

B r u c e J. S u m m e r s

P a y m e n t S y s te m (C H I P S ). C H IP S

n e s s d a y s a fte r th e y a re o r i g i ­

is p r im a r ily u s e d fo r d o ll a r d e ­

n a te d . A C H p a y m e n ts c o n s is t

t h e m e in th e t h in k in g o f

n o m in a t e d , f o r e i g n e x c h a n g e , a n d

p r im a r ily o f s o c i a l s e c u r it y a n d

b a n k e r s fo r tw e n ty y e a r s . B e c a u s e

in te r n a tio n a l tr a d e p a y m e n ts . T h e

s a la r y p a y m e n ts , a n d p r e a u t h o r ­

e l e c t r o n i c fu n d s tr a n s fe r (E F T )

a v e r a g e v a lu e o f a C H I P S p a y ­

iz e d in s u r a n c e p r e m iu m d e b it s .

r e p r e s e n t s a b r e a k t h r o u g h in th e

m e n t is a b o u t $ 3 .0 m illio n .

T h e A C H is a ls o u s e d b y c o r p o ­

n r

h e " c a s h le s s a n d c h e c k l e s s ”
s o c ie t y h a s b e e n a d o m in a n t

p a y m e n t p r o c e s s , m o s t d is c u s s i o n s

r a tio n s to c o n c e n t r a t e c a s h b a l ­

o f e l e c t r o n i c p a y m e n ts h a v e d e a lt

T h e r e m a in in g EFT s y s te m s a re

a n c e s a n d is b e g i n n i n g to b e u s e d

o n ly w ith e x p e c t e d fu tu r e d e v e l o p ­

p r i n c i p a l l y c o n s u m e r o r ie n t e d .

fo r v e n d o r p a y m e n ts . In co n tr a s t

m e n ts . In c o n tr a s t, th is a r t i c le

T h e y i n c l u d e th e a u t o m a t e d c l e a r ­

to F e d w ir e a n d C H IP S , th e A C H

f o c u s e s o n th e le s s o n s o f th e p a s t.

in g h o u s e ( A C H ) , a u t o m a t e d te lle r

is p r im a r ily a s m a ll-d o lla r m e c h a ­

T h e r e is n o w e n o u g h e x p e r i e n c e

m a c h in e (A T M ), a n d p o in t - o f - s a l e

n ism . T h e a v e r a g e v a lu e o f an

w ith EFT to p e r m it a m e a n in g fu l

(P O S ) s y ste m s.

A C H p a y m e n t is a b o u t $ 3 ,3 0 0 ,

h is t o r ic a l e x a m in a t io n o f th e u s e s

v a lu e - d a t e d m e c h a n is m ; that is,

a n d o v e r 8 0 p e r c e n t o f a ll A C H

a n d s u c c e s s e s of e le c tr o n ic

p a y m e n ts s e ttle o n e to tw o b u s i­

p a y m e n ts h a v e a v a lu e o f $ 1 ,0 0 0

p a y m e n ts .

T h e A C H is a

o r le ss .

Electronic Payments Overview
B e fo r e c o n d u c t i n g th is e x a m i n a ­
tio n , it is u s e fu l to r e v ie w th e
t y p e s o f e l e c t r o n i c p a y m e n ts that
a r e c u r r e n t ly in u se. T h e o ld e s t
a n d m o s t m a tu r e EFT s y s te m is
F e d w ire , th e F e d e r a l R e s e r v e 's
la r g e - d o l l a r fu n d s tr a n s fe r s e r v ic e .
F e d w ir e is u s e d fo r t i m e -c r i t ic a l
p a y m e n ts , lik e in t e r b a n k p u r ­
c h a s e s a n d s a le s o f o v e r n ig h t
fu n d s , r e a l e s ta te c lo s i n g s , a n d so
fo r th . T h e a v e r a g e v a lu e o f a F e d ­
w ir e p a y m e n t is a b o u t $ 2 .6 m i l­
lio n . T h e N e w Y ork C l e a r i n g
H o u s e A s s o c ia t i o n a ls o o p e r a t e s a
l a r g e - d o l l a r fu n d s tr a n s fe r sy s te m
c a l l e d C l e a r i n g H o u s e I n te r b a n k




Senior Vice President Bruce J. Summers explains a proposed innovation in Federal
Beserve electronic payments to First Vice President Jim m ie B. M onhollon.

7

E lectron ic P aym ents in R etro sp ect

A T M n e tw o r k s a r e p r im a r ily u s e d

A C H

V O L U M E

1977-1986

fo r c a s h w ith d ra w a ls . T h e a v e r a g e
A T M t r a n s a c t io n is v e r y s m a ll,
a b o u t $ 4 0 p e r t r a n s a c t io n . A T M
n e tw o rk s p r o c e s s th e h ig h e s t v o l ­
u m e o f a ll E FT s y s te m s . P O S s y s ­
tem s p e r m it c o n s u m e r s to p a y fo r
p u r c h a s e s t h r o u g h d ir e c t d e b it s to
th e ir a c c o u n t s . L ik e A T M t r a n s a c ­
tio n s, P O S t r a n s a c t io n s a r e s m a lld o lla r p a y m e n ts , a v e r a g in g a b o u t
$ 2 5 p e r t r a n s a c t io n . S o m e P O S
sy stem s a r e o n - li n e , r e a l-t im e s y s ­
tem s th at tr a n s fe r fu n d s to th e

100

m e r c h a n t im m e d ia te ly . O t h e r s y s ­
tem s a r e o f f - li n e a n d u s e th e A C H
fo r c l e a r i n g . C u r r e n tly , P O S s y s ­

1977 1978 1979 1980 1981 1982 1983 1984 1985 1986

The annual rate of growth in total A C H volume processed by both the Federal
Beserve and private operators averaged 25.5 percent in the late 1970s, then slowed
to 19.7 percent over the next six years.

tem s a r e u s e d p r e d o m in a n t l y b y
o il c o m p a n ie s , g r o c e r y c h a in s ,
a n d c o n v e n i e n c e s to r e s . A b o u t 6 6
m illio n t r a n s a c t io n s w e r e p r o ­
c e s s e d in 1 987.

m o d e l s o f th e life c y c l e o f a s e r ­

s u c c e s s e s a n d fa ilu r e s o f e l e c ­

v ic e , th is s ig n a ls a m a tu r e s t a g e

t r o n ic p a y m e n ts .

th at fo llo w s th e lo w -g r o w th s ta rt­
u p p e r i o d a n d th e " t a k e - o f f " p e r i ­
o d o f a c c e l e r a t i n g g r o w th . T h e

C

o m b i n e d , t h e s e e le c t r o n i c
p a y m e n t m e c h a n is m s a c ­
c o u n t fo r o n ly 1.2 p e r c e n t

s u g g e s t io n

of

m a tu rity

fo r

a S ta tic C h e c k S y ste m

th e

A C H c o m e s a s a s u r p r is e , b e ­
c a u s e th e A C H is t y p ic a l ly v ie w e d

o f th e n a tio n 's to ta l n o n c a s h

as a n in fa n t s y s te m o n th e t h r e s h ­

p a y m e n ts .1 T h u s , in te r m s o f m a r ­

o ld o f a c c e le r a t in g g row th a n d

ket sh a re , E FT h a s n o t f u lf ill e d e x ­

th e m o s t lik e ly s u b s titu te fo r th e

p e c t a t io n s th at it w o u l d b e c o m e

ch eck .

th e w i d e ly a c c e p t e d s u b s titu te fo r
p a p e r c h e c k s . F u rth er, E FT v o l ­

L e sso n 1: E F T Is N o t C h a lle n g in g

W h y h a s th e o b j e c t i v e o f s i g n i f i ­

u m e g r o w t h ra te s a p p e a r to b e

c a n t ly i n c r e a s i n g th e e f f i c i e n c y o f

d e c l i n i n g , w ith th e e x c e p t i o n o f

th e p a y m e n t s y s te m b y c o n v e r t i n g

P O S , w h i c h is a v e r y y o u n g s e r ­

fr o m c h e c k s to e l e c t r o n i c p a y ­

v i c e w ith m a n y a p p li c a t io n s c o n ­

m e n ts n o t b e e n m e t?

It is im p o r ta n t to u n d e r s t a n d th e
o v e r a ll p a y m e n t s y s te m a n d h o w it
a ff e c t s EFT u s a g e . In p a r t ic u la r , it
m u st b e r e c o g n i z e d that th e c h e c k
s y s te m is itse lf c h a n g i n g .

The

c o s t s o f h a n d l in g c h e c k s a r e p r o b ­
a b l y fa llin g , s e r v i c e is im p r o v i n g ,
and

c o n s e g u e n tly

th e

u sers

of

c h e c k s are p r o b a b ly m ore, n ot
le s s , s a tis fie d .

s id e r e d p ilo t p r o je c t s . In p a r ­

C on gress

ticu la r, as s h o w n o n th e c h a r t,

le g i s la t i o n th at r e g u ir e s fu r th e r

A C H v o lu m e g r o w t h h a s b e e n
s lo w in g s in c e 19 8 0 . In tr a d itio n a l

has

r e c e n t ly

passed

im p r o v e m e n t s in th e c h e c k s y s ­

Lessons from the EFT
Experience

te m . T h e C o m p e t it iv e E g u a lity

T h e r e c e n t h is t o r y o f E FT r e v e a ls

p r o v e d fu n d s a v a ila b ilit y fo r d e ­

fo u r le s s o n s th a t h e lp e x p la i n th e

p o s it o r s o f c h e c k s . T h e p r o c e s s

B a n k in g A c t o f 1 9 8 7 m a n d a t e s im ­
1 Allen N. Berger, "The Economics of Elec­
tronic Funds Transfer," Board of Governors of
the Federal Reserve System, October 2, 1985.




E lectron ic P aym ents in R etro sp ect

l e a d i n g to th is l e g i s la t i o n h a s

T otal c h e c k c o l l e c t i o n flo a t h a s

in g th e d e c i s i o n to u s e c h e c k s .

a lr e a d y r e s u lt e d in m a jo r e ffo r ts

d e c l i n e d in r e c e n t y e a r s , e s p e ­

A b s e n t a c h a n g e in th e l e g a l e n ­

o n th e p a r t o f th e in d u str y , in ­

c ia l l y s in c e th e M o n e t a r y C o n t r o l

v ir o n m e n t , th e r e w ill c o n t i n u e to

c l u d i n g th e F e d e r a l R e s e r v e a n d

A c t o f 1 980 r e g u i r e d th e F e d e r a l

b e a s t r o n g d is i n c e n t i v e fo r c o n ­

d e p o s i t o r y in s titu tio n s , t o im p r o v e

R e s e r v e to e lim in a t e o r p r i c e a ll

v e r t in g to E FT d u e to th e flo a t

th e c h e c k r e tu r n ite m p r o c e s s .

flo a t in its p a y m e n t o p e r a t io n s .

b e n e f it fr o m w r it in g c h e c k s .

D a ily a v e r a g e F e d e r a l R e s e r v e
I m p r o v e m e n t s in th e c h e c k s y s ­

c h e c k c o l l e c t i o n flo a t h a s b e e n

te m w ill c h a l l e n g e e l e c t r o n i c p a y ­

r e d u c e d fr o m a p e a k o f a p p r o x ­

m e n t s u b s titu te s to p r o v i d e b e t t e r

im a te ly $ 6 .0 b i l l i o n in 1 979 to

a n d m o r e e f f ic ie n t s e r v i c e to e n ­

a b o u t $ 7 0 0 m i lli o n t o $ 8 0 0 m illio n

c o u r a g e a m a rk e t-b a se d c o n v e r ­

to d a y . T h is r e d u c t i o n is n o t s u ffi­

n e w p a y m e n t s e r v ic e s to s u b s t i­

s io n fr o m th e c h e c k . O v e r th e

c ie n t i n - a n d - o f - it s e lf to c h a n g e

tu te fo r th e c h e c k . I n d iv id u a ls a r e

L e sso n 3 : C o n s u m e r H a b its
F a v o r th e U se o f C h e c k s
F ew u s e r s a r e a c t iv e ly s e e k in g

b e h a v io r a l p a tte r n s , h o w e v e r , b e ­

n o t; fo r th e m th e p a p e r c h e c k

fu n d s a v a ila b ilit y w ill e n c o u r a g e

c a u s e a n e s t im a t e d $ 1 8 3 b i l l i o n in

v e r y t a n g ib l y r e p r e s e n ts e a r n i n g

g r e a t e r u s e o f E FT b e c a u s e , as

c h e c k p r o c e s s i n g a n d m a il flo a t

p o w e r a n d w e a lth . F or in d iv i d u a l s

d e s c r i b e d b e lo w , th e w r ite r s o f

still e x is t s in th e rest o f th e c h e c k

a n d b u s in e s s e s , c h e c k s a ls o s a tisfy

c h e c k s s ta n d to l o s e s o m e o f th e

s y s te m .3

th e n e e d to c o n t r o l a n d a c c o u n t

lo n g

ru n,

h ow ever,

im p r o v e d

fo r t r a n s a c t io n s in a m a n n e r th at

" b e n e f i t s " o f c h e c k flo a t.
T h e F ed era l R e s e r v e h as e x a m in e d

is c o n s is t e n t w ith tr a d itio n a l a c ­

th e p o s s ib i li t y o f s h ift in g th e c o s t

c o u n t in g a n d b o o k k e e p in g

F lo a t Is a P r e r e q u is ite to

o f at le a s t p a r t o f th e flo a t a r is in g

p r a c tic e s .

E F T G ro w th

in th e c h e c k c o l l e c t i o n p r o c e s s to

L e sso n 2 : R e d u c tio n in C h e c k

th e p a y o r b a n k , th a t is, th e in s ti­

o m e b u s in e s s a n d g o v e r n ­

T h e s a v in g s fr o m u s in g E FT in

tu tio n (a n d b y e x t e n s io n th e i n d i ­

m e n ta l e n tit ie s , h o w e v e r ,

p l a c e o f c h e c k s p r o m i s e to b e s i g ­

v id u a l c h e c k w r ite r ) b e n e f i t i n g

h a v e a c t iv e ly s o u g h t o u t n e w

n ific a n t . F or e x a m p le , a r e c e n t

fr o m c h e c k flo a t. A c c o r d i n g to th e

p a y m e n t m e th o d s. T h e g re a t r e li­

s tu d y h a s s h o w n th at th e c o s t o f

U n ifo r m C o m m e r c i a l C o d e ( U C C )

a n c e n o w p l a c e d o n fu n d s tr a n s fe r

A C H d ir e c t d e p o s it s m a d e b y th e

and

its

in t e r p r e t a t io n

by

th e

sy s te m s to s u p p o r t m o n e y m a r k e t

U. S. g o v e r n m e n t is s ig n i fic a n t l y

c o u r t s , h o w e v e r , c o l l e c t i n g in s ti­

a c t iv it y is a p r o m in e n t e x a m p le .

le s s th a n th e c o s t o f m a k in g th e

tu tio n s , i n c l u d i n g F e d e r a l R e s e r v e

O n l y " i m m e d ia t e " w ir e tr a n s fe r

s a m e p a y m e n ts b y c h e c k . B ut, th e

B a n k s , a r e p r o v i d i n g s e r v i c e s to

s y s te m s h a v e th e s p e e d a n d a u t o ­

lo s s o f th e flo a t b e n e f it t o th e

th e c o l l e c t i n g p a r t y a n d h a v e n o

m a t io n t o s u p p o r t th e in c r e a s i n g l y

U. S. g o v e r n m e n t fr o m u s in g th e

r ig h t

a c t iv e p a c e o f t r a d in g , e s p e c i a l l y

A C H fo r s a la r y a n d b e n e f it p a y ­

pa yor.

to

assess

T hu s,

ch arges

sou n d

to

th e

e c o n o m ic

in n a t io n a l a n d in te r n a tio n a l

m e n ts m o r e th a n o ffs e t s th e r e a l

a r g u m e n t s n o t w it h s t a n d in g , th e

m a r k e ts . In a d d it io n , EFT is b e i n g

r e s o u r c e s a v in g s (lo w e r c o s t ) o f

c u r r e n t l e g a l fr a m e w o r k a p p a r ­

e n c o u r a g e d fo r c o r p o r a t e p a y ­

u s in g A C H . 2

e n tly d o e s n o t p e r m it a r e d is t r ib u ­

m e n ts a s a n e x t e n s io n o f e ffo r t s to

tio n o f flo a t c o s t to th e p a r ty m a k ­

a u t o m a t e m a n u fa c t u r in g a n d in ­
v e n to ry m a n a g em en t. T h e a u to ­

2 W illia m C. Dudley, A Comparison of Direct
Deposit and Check Payment Costs, Staff
Studies 141, B oard of G overnors of the Federal
Reserve System, N ovem ber 1984.




m a t io n o f c o r p o r a t e b ill p a y in g
3 W illia m C . Dudley, "T he Tug-ofWar O ver
Float," Morgan Guaranty Survey, D ecem ber

is b e i n g " p u l l e d a l o n g " a s p a r t o f

1983, p p . 11-14.

th e m u c h la r g e r m o v e m e n t to w a r d

9

E lectron ic P aym ents in R etro sp ect

to ta l a u to m a t io n . T h is e x t e r n a l

h e c o m p l e x i t y o f th e E FT

m o m e n tu m a p p e a r s to b e g re a t

p r o c e s s h a s b e c o m e a n is s u e

e n o u g h fo r c o m p a n i e s to s e e k

I
Jk

in t h e c a s e o f th e A C H ,

m e a s u r e o f s u c c e s s fo r e l e c t r o n i c
p a y m e n t s is r e la t e d to th e o n e f o r - o n e d is p l a c e m e n t o f c h e c k s b y

w h ic h h a s b e c o m e a g e n e r a l p u r ­

e l e c t r o n i c tr a n s fe r s . It is u n r e a s o n ­

b e n e fit s th at c u r r e n t ly e x is t in th e

p o s e s y s te m s u p p o r t in g b o t h c o r ­

a b le , h o w e v e r , to e x p e c t a la r g e -

c h e c k sy ste m . T h u s , u s e o f n e w

p o r a t e a n d c o n s u m e r tr a n sfe rs.

s c a l e c o n v e r s i o n fr o m c h e c k s to

p a y m e n t m e t h o d s a p p e a r s to d e ­

C o r p o r a t i o n s a c t i v e ly in v o lv e d in

e l e c t r o n i c tr a n s fe r s w h e n in s titu ­

p e n d in p a r t o n th e a c c e p t a n c e

b oth c o r p o r a te a n d co n su m e r

t io n a l a n d b e h a v io r a l fa c t o r s

b y c o r p o r a t i o n s a n d in d iv i d u a l s o f

tr a n s a c t io n s h a v e b e c o m e c o n ­

c r e a t e a b ia s in fa v o r o f e x is t in g

n e w t e c h n o l o g y in t h e o v e r a ll

c e r n e d th a t th e A C H is o v e r ly

p a y m e n t m e t h o d s . F lo a t in c e n t i v e s

c o m p l e x a s a r e su lt o f its b e i n g

th at fa v o r c h e c k s , a s w e ll a s c o n ­

w ays to n e g o t ia t e th e lo s s o f flo a t

m a n a g e m e n t o f th e ir a ffa irs.

m o d i f i e d t o s u p p o r t m a n y d if f e r ­

s u m e r h a b its , s h o u ld b e r e c o g ­

e n t t y p e s o f a p p li c a t io n s . F or e x ­

n iz e d a s h a v in g a n im p o r ta n t i n ­

o f S ta n d a r d s In h ib it th e U se

a m p le , a r e c e n t s u r v e y o f c o r p o ­

f l u e n c e o n th e o v e r a ll ra te o f a c ­

o f EFT

ra te c a s h m a n a g e r s f o u n d that

c e p t a n c e o f e l e c t r o n i c p a y m e n ts .

L esso n 4 : C o m p le x ity a n d L a c k

S everal s p e c ia liz e d e le c t r o n ic p a y ­
m ent

n e tw o r k s

have

been

de­

v e l o p e d to m e e t th e r e g u ir e m e n t s
o f p a r t ic u la r m a r k e t s e g m e n t s . A
c e r t a in a m o u n t o f s p e c ia l iz a t i o n ,
fo l lo w in g th e n a tu ra l d i f f e r e n c e s
in b u s in e s s r e g u ir e m e n t s fo r v a r i­
ou s e le c tr o n ic p a y m en t a p p lic a ­

o v e r tw o -th ir d s o f t h e s e k n o w l­
e d g e a b l e in d iv i d u a l s fin d th e d i ­

A s a n a lt e r n a t iv e to m a r k e t s h a re ,

v e r s it y o f a p p l i c a t i o n s fo r w h ic h

a m o r e s p e c i f i c m e a s u r e o f th e

th e A C H is u s e d to b e s o d a u n t ­

c o n t r ib u t i o n o f E FT to th e p a y ­

in g th a t th e y c a n n o lo n g e r r e a d ­

m e n t p r o c e s s s h o u ld b e a d o p t e d .

ily d if fe r e n t ia t e a m o n g t h e m .4

Prescriptions ior the Future

tio n s , m a k e s s e n s e . F or e x a m p le ,

T h e s e fo u r le s s o n s s u g g e s t th e

w ir e tr a n s fe r s y s te m s th at s e r v e

e le m e n t s o f a p la n fo r m a n a g in g

th e m o n e y m a r k e ts , s u c h as F e d -

th e fu tu r e o f e l e c t r o n i c p a y m e n ts .

w ir e a n d C H I P S , m e e t v e r y d i f ­

F o u r p r e s c r ip t io n s a r e o ff e r e d .

c ie n c y

s h o u ld

be

in d iv id u a lly

c a t a l o g u e d a n d a s s e s s e d , ta k in g
in to a c c o u n t a n y in s titu tio n a l d i s ­
in c e n t i v e s that m u st b e o v e r c o m e .
V ie w e d in th is lig h t , th e c u m u l a ­
tiv e e v i d e n c e o f e x p e r i e n c e s , s u c h

fe r e n t n e e d s th a n d o A T M a n d
P O S sy ste m s that p r o v i d e a lt e r ­

E FT a p p l i c a t i o n s th at o ff e r e n ­
h a n c e d s e r v ic e o r g re a te r e ffi­

P r e s c r ip tio n 1: R e v is e E x p e c ta ­

a s A C H d ir e c t d e p o s it , c o r p o r a t e

n a tiv e s to u s in g c a s h a n d c h e c k s

tio n s fo r E F T to R e fle c t In s t i­

c a s h c o n c e n t r a t io n , a n d m o n e y

fo r p u r c h a s e s o f r e la t iv e ly s m a ll

t u t io n a l a n d M a r k e t R e a litie s

m a r k e t t r a n s a c tio n s , p a in ts a m o r e

v a lu e . T h e c u r r e n t s p e c ia l iz a t i o n
a m o n g E FT n e tw o r k s b a s e d o n
d if f e r e n c e s in b u s in e s s r e g u i r e ­
m e n ts h a s n o t c r e a t e d u n d u e c o m ­
p le x it y fo r d e p o s i t o r y in s titu tio n s

p o s it iv e p ic t u r e o f E FT as a s u c ­
M a r k e t s h a r e s h o u ld b e a c c o r d e d

c e s s fu l c o n t r ib u t o r to th e p a y m e n t

le s s im p o r t a n c e a s a m e a s u r e o f

p rocess.

s u c c e s s a n d e x p e c t a t i o n s fo r th e
c o n v e r s i o n to E FT s h o u ld b e r e ­
v i s e d d o w n w a r d .5 T y p ic a lly , th e

o r e n d u s e r s . O n th e c o n tr a r y , a
c o n c e r n w ith c o m p l e x i t y h a s
a r is e n a s a re su lt o f th e la c k o f
s p e c ia liz a t io n .

P r e s c r ip tio n 2 : S tre ss In s tit u t io n a l
C h a n g e to E n c o u r a g e E F T
In s titu tio n a l c h a n g e s that e l i m i ­

4 Steven F. M aier a n d Larry A. Marks,
"A p plica tio ns a n d Models: C ash M anagers'
Use of A C H ," Journal o f Cash Management,
Septem ber/O ctober 1986, pp. 46-48.

n a te a r t ific ia l b a r r ie r s a re a
n e c e s s a r y p r e r e g u is it e to th e
b r o a d - b a s e d a c c e p t a n c e o f EFT.

5 Jim m ie R. M o n h o llo n a n d Bruce J. Summers,
"The Role of the Federal Reserve in the E lec­
tronic Payments Evolution," Journal of Cash
Management, M ay/June 1987, pp. 23-26.

10




E lectron ic P aym ents in R etro sp ect

In p a r t ic u la r , la w s a n d r e g u la t io n s

s o n a b ly w e ll. F u rth er, th e o r ig i n a l

s h o u ld b e e x a m i n e d to d e t e r m in e

A C H s tr u c tu r e u s e d fo r r e ta il a p ­

s h o u ld b e fu n d a m e n t a lly r e v ie w e d

if c h a n g e s c a n b e m a d e to p e r m it

p li c a t io n s a ls o a p p e a r s to m e e t

to d e t e r m i n e if t h e c o m p l e x i t y that

c h a r g i n g flo a t c o s t s to c h e c k

b a s i c u s e r r e g u ir e m e n ts . T o d a y 's

a r is e s b y c o m b i n i n g w i d e ly d i f f e r ­

w rite rs. B e c a u s e c h e c k w rite r s

c o n c e r n is c e n t e r e d a r o u n d th e

in g p a y m e n t s in o n e s y s te m c a n

c o n t r o l h o w p a y m e n t s a r e in iti­

s u p p o r t p r o v i d e d in th e A C H fo r

b e red u ced .

a te d , c h a r g i n g th e m at le a st p a r t

n e w c o r p o r a t e tr a d e p a y m e n ts .

t r a n s a c t io n . T h e A C H d e s i g n

o f th e c o s t o f c h e c k flo a t w o u ld

E ffo rts to s im p lify th e A C H s h o u ld

r e d u c e w h a t is p r o b a b l y th e s in g l e

ta k e in to a c c o u n t th e p o s s ib i li t y

m o st s ig n ific a n t in s titu tio n a l b a r ­
r ie r to u s e o f EFT.

T

h e A C H c u r r e n t ly s u p p o r t s
a w id e ra n g e o f p a y m en t a p ­
p li c a t io n s , i n c l u d i n g s a la r y

th a t t h e n e w c o r p o r a t e t r a d e p a y ­
m e n t a p p l i c a t i o n s m ig h t b e s t b e
s u p p o r t e d in a s y s te m s e p a r a t e

P r e s c r ip tio n 3: S im p lif y E F T

a n d p r e a u t h o r iz e d d e b it t r a n s a c ­

If m a r k e t p l a c e c o m p l a in t s a b o u t

t io n s th at r e g u ir e little e x p l a n a ­

s im p le r c o n s u m e r a n d c o m m e r c i a l

c o m p l e x i t y a r e a g a u g e , th e n " i m ­

t o r y in fo r m a t io n a n d v e n d o r p a y ­

t r a n s a c t io n s . S e p a r a t io n o f p a y ­

m e d i a t e " w ir e tr a n s fe r s y ste m s

m e n ts th at m u st fr e g u e n t ly s u p ­

m e n t s y s te m s m a y b e a w a y to

a p p e a r to b e d o i n g th e ir j o b r e a ­

p o r t e x t e n s iv e a m o u n ts o f in fo r ­

s im p lif y s e r v i c e s fo r d iffe r e n t

m a t io n r e la t in g to th e u n d e r l y in g

fr o m th a t d e s i g n e d a n d u s e d fo r

c a te g o r ie s o f u sers. S u ch se p a ra ­
t io n m ig h t ta k e th e fo r m o f a n e n ­
t ir e ly d is t in c t set o f fo r m a ts a n d
o p e r a t i n g r u le s fo r h i g h l y s p e c i a l ­
i z e d t y p e s o f p a y m e n t s . It is a ls o
p o s s i b l e th at s o p h is t i c a t e d c o r p o ­
ra te t r a d e p a y m e n t a p p l i c a t i o n s
m a y b e h a n d l e d o n ly b y a s u b s e t
o f d e p o s i t o r y in s titu tio n s , ra th e r
th a n b e c o m i n g a " u n iv e r s a l s e r ­
v i c e " lik e A C H .
P r e s c r ip tio n 4: S tre ss P ro v e n E F T
A p p lic a tio n s
If o n e a c c e p t s th e p r e s c r ip t io n s
fo r p r o m o t i n g p a y m e n t s y s te m
e ffic ie n c y c e n te r in g a r o u n d r e ­
v i s e d e x p e c t a t i o n s fo r E FT c o m ­
b i n e d w ith m a jo r in s titu tio n a l a n d
s tr u c tu r a l c h a n g e s , t h e n c l e a r l y
m u c h w o r k is r e g u ir e d . T h e p r o ­
c e s s o f e f f e c t i n g in s titu tio n a l
c h a n g e c o u l d ta k e y e a r s . In th e
m e a n t im e , h o w s h o u ld in v e s tm e n t

The Federal Reserve's nationw ide com puter and com m unications network uses stateof-the-art technology to process A C H and Fedwire transactions.




in E F T b e m a n a g e d to m a x im iz e
e c o n o m i c r e tu r n s ?

11

E lectron ic P aym ents in R etro sp ect

sh ift in e m p h a s is a w a y fr o m

to EFT c a n still b e s t b e m e t b y

T h e o b je c t iv e o f e n c o u r a g in g a

" e x o t i c " A C H a p p li c a t io n s

A

f o c u s in g E FT m a r k e t in g e ffo r ts o n

m o r e e f f ic ie n t p a y m e n t s y s te m c a n

p r o v e n a p p li c a t io n s w h o s e fu ll
t o p r o v e n u s e s w o u ld p e r ­ n tia l r e m a in s u n t a p p e d .
p o te
m it a c o n t i n u e d c o m m it m e n t to

b e s t b e m e t b y r e ly i n g o n th e

E FT th at is c o n s is t e n t w ith s o u n d

Conclusion

to p r o v i d e m a r k e t - b a s e d e c o n o m i c

b a s e d o n F e d e r a l R e s e r v e e s t i­

W h e n m e a s u r e d u s in g th e t r a d i­

m ent

m a te s , th e r e is still a v e r y la r g e

tio n a l c o n c e p t o f m a r k e t sh a re ,

c h a n g e s in h o w flo a t c o s ts a re

g r o w th in e l e c t r o n i c p a y m e n ts h a s

b o r n e . F or n o w , in v e s tm e n t in a n d

i z e d p a y m e n t s a n d d i r e c t d e p o s it

r e s u lte d in u n f u l fi lle d e x p e c t a ­

p r o m o t i o n o f E FT s h o u ld b e r e ­

A C H s e r v ic e s , w h i c h r e p r e s e n t e d

tio n s . Yet, th e r e c e n t h is to r y o f

f o c u s e d o n p r o v e n m a rk e ts that

■

b u s in e s s s tra te g y . F or e x a m p le ,

u n t a p p e d m a r k e t fo r p r e a u t h o r ­

m a r k e t p r o c e s s . T h e fu tu re o f E FT
d e p e n d s o n in s titu tio n a l c h a n g e s
in c e n t i v e s fo r u s in g b e t t e r p a y ­
te c h n ig u e s ,

e s p e c ia lly

th e o r i g i n a l r e a s o n f o r d e v e l o p i n g

EFT s h o w s that in s titu tio n a l c o n d i ­

o ff e r th e g r e a t e s t p o t e n t ia l fo r

th e A C H . It is e s t im a t e d th at o n ly

tio n s a re la r g e l y r e s p o n s ib l e fo r

v o lu m e g r o w t h w ith th e le a st

10 to 12 p e r c e n t o f a ll in s u r a n c e

p r e v e n t in g a b r o a d - b a s e d c o n v e r ­

c o m p le x it y .

p r e m iu m s a n d 6 to 8 p e r c e n t o f

s io n fr o m th e c h e c k . In a d d it io n

a ll p a y r o lls a r e m a d e u s in g th e
A C H . T h e o b j e c t i v e o f in c r e a s i n g
th e e f f i c i e n c y o f th e p a y m e n t

to in s titu tio n a l d is i n c e n t i v e s , EFT

T h is a p p r o a c h w ill r e su lt in m o r e

g r o w th h a s b e e n h u rt in th e 1 980s

r e a lis t ic e x p e c t a t i o n s fo r EFT

b e c a u s e o f a sh ift in m a r k e t in g
s y s te m aw ayo n v e r t t na d itiom a l h e cy ­ s
fo c u s b y c fr o m i r g fr o n c p a k
m e n t m a r k e ts to e x o t i c n e w m a r ­
kets. F u rth er, b y m i x in g s im p le
A C H a p p li c a t io n s w ith s o p h is t i­
c a t e d c o r p o r a t e tr a d e a p p li c a t io n s
in o n e s y s te m , th e E FT p r o c e s s
has b e c o m e m o re c o m p le x .

12




g r o w t h a n d a m o r e o r d e r ly e v o ­
lu tio n to e l e c t r o n i c p a y m e n ts .




13

(December 31, 1987)

R IC H M O N D
CH A IRM A N

L e r o y T . C a n o le s , J r.
President
Kaufman & Canoles
Norfolk, Virginia
DEPUTY CH AIRM AN

R o b e r t A . G e o r g in e
President
Building & Construction
Trades Department
AFL-CIO
Washington, D.C.

R o b e rt F . B a ro n n e r
Chairm an of the Board and
C hief Executive Officer
O ne Valley Bank, N.A.
President and C hief Executive Officer
One Valley Bancorp
of West Virginia, Inc.
Charleston, West Virginia

T h o m a s B . C o o k e r ly
President
Broadcast Division
Allbritton Communications
Washington, D.C.

E d w a r d H . C o v e ll
President
The C ovell Company
Easton, Maryland

First row: Floyd D. Gottwald, Jr.; Leroy T Canoles, Jr.; Robert A. Georgine;
.
Hanne M errim an. Second row: Thomas B. Cookerly; Edward H. Covell.
Third row: Robert F. Baronner; Chester A. Duke; K. D onald Menefee.

C h e s te r A . D u k e
President and C hief Executive Officer
Marion National Bank
Marion, South Carolina

F lo y d D . G o t t w a ld , J r.
Chairm an of the Board and
C hief Executive O fficer
Ethyl Corporation
Richmond, Virginia

FE D E RA L A D V IS O R Y C O U N C IL

M EM BER

K . D o n a ld M e n e fe e
Chairm an of the Board and
C hief Executive Officer
Madison National Bank
Chairm an of the Board and President
James Madison Limited
Washington, D.C.

H a n n e M e r r im a n
Washington, D.C.

14




J o h n G . M e d lin , J r.
Chairm an, President, and
C hief Executive Officer
First Wachovia Corporation
Winston-Salem, North Carolina

B A L T IM O R E
CHAIRMAN

Gloria L. Johnson
Regional Vice President, Director of Stores
Bloomingdale's Department Stores
Kensington, Maryland

John R. Hardesty, Jr.
President
Preston Energy, Inc.
Kingwood, West Virginia

H. Grant Hathaway
Chairman of the Board
Eguitable Bank, N.A.
Baltimore, Maryland

Raymond V Haysbert, Sr.
.
President and Chief Executive Officer
Parks Sausage Company
Baltimore, Maryland

Charles W Hoff III
.
President and Chief Executive Officer
Farmers and Mechanics National Bank
Frederick, Maryland

loseph W. Mosmiller
Chairman of the Board
Loyola Federal Savings and Loan Association
Baltimore, Maryland

Thomas R. Shelton
President
Case Foods, Inc.
Salisbury, Maryland

CHARLOTTE
CHAIRMAN

Wallace I. lorgenson
President
Jefferson-Pilot Communications Company
Charlotte, North Carolina

(Top Above) Seated: Charles W. Hoff III; H. Grant Hathaway; John R.
Hardesty, Jr. Standing: Joseph W. Mosmiller; Thomas R. Shelton.
(Bottom Above) Gloria L. Johnson; Raymond V Haysbert, Sr.; Senior
.
Vice President Robert D. McTeer, Jr.

G. Alex Bernhardt
President
Bernhardt Industries, Inc.
Lenoir, North Carolina

James E. Bostic, Jr.*
Division General Manager
Convenience Products Division
Georgia-Pacific Corporation
Aiken, South Carolina

J. Donald Collier
President and Chief Executive Officer
O rangeburg National Bank
Orangeburg, South Carolina

James M. Culberson, Jr.
Chairman and President
The First National Bank of Randolph County
Asheboro, North Carolina

John A. Hardin
Chairman of the Board and President
First Federal Savings Bank
Rock Hill, South Carolina

James G. Lindley
Chairman and Chief Executive Officer
South Carolina National Corporation

Chairman, President, and
Chief Executive Officer
The South Carolina National Bank
C olum bia, South Carolina

Seated: G. Alex Bernhardt; Wallace J Jorgenson; James G. Lindley;
.
Senior Vice President Albert D. Tinkelenberg. Standing: John A. Hardin;
James E. Bostic, Jr.; J Donald Collier; James M. Culberson, Jr.
.

R n fro th Ba in S temer a r b g
esig ed m e o rd ep b fte ein
tra sfe d o t of th D trict.
n rre u
e is




15

A d v i s o r y

C o u n c i l s

(December 31, 1987)

S m a ll B u s in e s s

O p e r a t io n s A d v is o r y C o m m it te e

a n d A g r ic u lt u r e
Chairman
W
alter E Leonard, J
.
r.
Group Vice P
resident
W
achovia B &T st Com
ank ru
pany, N .
.A
W
inston-Salem N C
, orth arolina
W
illiam E Albert
.
Vice President and C
ashier
The F N
irst ational B k of B
an
luefield
Bluefield, W V
est irginia
J Alonzo
ose"
President
W V
est irginia Credit U
nion League, Inc.
Parkersburg, W V
est irginia
Thom P B
as . aker
President
Investors Savings B k
an
Richm
ond, V
irginia

Richard L H
. all
Senior Vice P
resident and C
ashier
The R N
iggs ational B k of V
an
irginia
M
errifield, V
irginia

A d v is o r y C o u n c il

lam D K
es . ing
P
resident
P
oinsett Federal Savings and L A
oan ssociation
Travelers R S
est, outh C
arolina

Chairm
an
Leon A. D
unn, J.
r
C
hairm and P
an
resident
G
uardian Corporation
R
ocky M
ount, N Carolina
orth

Ashpy P Low ore
.
rim
Senior Vice P
resident
F U
irst nion N
ational B k of South C
an
arolina
Florence, South C
arolina

V Chairm
ice
an
J lia M W
u . alsh
M
anaging D
irector
J lia M W &Sons/Tucker A
u . alsh
nthony
W
ashington, D
.C.

P MM
eter . artin
E
xecutive Vice P
resident
E
quitable B
ank, N .
.A
B ore, M
altim
aryland

W A an
atts um
M
anager
A an F
um arm
W E N Carolina
est nd, orth

Charles S B m itt
. ru m
Senior Vice President
N N South Carolina
CB
Colum South Carolina
bia,
Philip S. C
henault
Vice President
V
irginia Credit U
nion League
Lynchburg, V
irginia

Joh J M
n . orales
E
xecutive Vice P
resident
Andrew Federal Credit U
s
nion
Suitland, M
aryland

M
ichael C
lark
P
resident
C Insurance Services Com
lark
pany, Inc.
Richm
ond, V
irginia

Richard T Clarke
.
Vice P
resident
Am
erican Security B
ank, N .
.A
W
ashington, D.C.

H Jerry Shearer
.
E
xecutive Vice P
resident and C
ashier
Com ercial B k of the South, N (In O
m
an
.A.
rganization)
Colum South C
bia,
arolina

M
arshall N Colebank, J
.
r.
E
xecutive Vice President and C
ashier
The C
harleston N
ational B k
an
Charleston, W V
est irginia

Joh J Sponski
n.
Group E
xecutive O
fficer
Sovran B k N .
an , .A
N
orfolk, V
irginia

E Allen F er
.
ish
Secretary-Treasurer
W V
est irginia S B
tate uilding and
Construction Trades Council, AFL-CIO
C
harleston, W V
est irginia

E ard J Cunningham
dw .
Senior Vice President
Central Carolina B and T st Com
ank
ru
pany, N .
.A
D
urham N Carolina
, orth

R A. S ith
ita
m
E
xecutive Vice P
resident
W V
est irginia Savings League
C
harleston, W V
est irginia

John P D
. anahy
Vice President
The N
ational B k of W
an
ashington
W
ashington, D.C.

Loring E T
. ilton
Senior Vice P
resident
Colum F Federal Savings &L Association
bia irst
oan
W
ashington, D.C.

R
onald W D
. avies
Senior Executive Vice P
resident
M
aryland N
ational B k
an
B
altim M
ore, aryland

F G. W
.
alker
P
resident
R
aleigh Federal Savings B k
an
R
aleigh, N C
orth arolina

W
illiam G. D
ieter, J
r.
Executive Vice President
Signet B
ank-V
irginia
Richm
ond, V
irginia

R A. W
ick
ieczorek
P
resident
D
istrict of C
olum Credit U
bia
nion League
W
ashington, D
.C.

F M C. F
. .
ralix
President
m
nion
South Carolina State E ployees Credit U
Colum South Carolina
bia,

Jam R W
es . ilson
Vice P
resident
F C
irst arolina Corporate Credit U
nion
Greensboro, N C
orth arolina

H
arrison G
iles
Senior Vice President
NN N
C B ational B of N C
ank
orth arolina
C
harlotte, N Carolina
orth

16

Jam V M
es . cAveney
Senior Vice P
resident
Financial Services D
ivision
Loyola Federal Savings and L A
oan ssociation
B ore, M
altim
aryland

M
ichael T W
. ilson
Chief E
xecutive O
fficer and E
xecutive Vice President
South B
ranch V
alley N
ational B k
an
M
oorefield, W V
est irginia




D
ickie S C
. arter
President and Chief E
xecutive Officer
U
rban Service System Corporation
s
W
ashington, D
.C.

Cecil H G
. annon
P
resident
Cecil H G
. annon &Sons, Inc.
E ,M
aston aryland
D
aniel P H
. enson III
Senior D
eveloper
Struever B
rothers, Eccles &R
ouse
B ore, M
altim
aryland
C
harles H Ja es II
. m
P
resident
C. H Jam &Co.
.
es
C
harleston, W V
est irginia
W
illiam E M
. asters
P
resident
Perception, Inc.
E
asley, South C
arolina
C
harles O. S
trickler
P
resident
Rocco E terprises; Inc.
n
H
arrisonburg, V
irginia
Ju D W S
lian . iles, r.
P
resident
J D W F s, Inc.
. . iles arm
F M S
ort otte, outh Carolina

(December 31, 1987)

B altim ore

R ich m on d
Robert P. B lack, President

Robert D. McTeer, Jr., Senior Vice President

Jim m ie R. M o n h o llo n , First Vice President

R o nald B. D u n c a n , Vice President
W illia m E. Pascoe II I, Vice President
G e ra ld L. W ils o n , Vice President

W e lfo rd S. Farm er, Executive Vice President
J. A lfre d B roaddus, Jr., Senior Vice President and
Director o / Research
Roy L. F auber, Senior Vice President
A rth u r V. Myers, Jr., Senior Vice President
James D. Reese, Senior Vice President
Bruce J. Sum m ers, Senior Vice President
James F. Tucker, Senior Vice President
J. L ander A llin , Jr., Vice President
Fred L. B agw ell, Vice President
D an M . Bechter, Vice President
Lloyd W . Bostian, Jr., Vice President
Timothy Q . C o o k, Vice President
W illia m E. C u llis o n , Vice President
D onna G . D ancy, Vice President
W yatt F. Davis, Vice President
G e o rg e B. Evans, Vice President
W illia m C . F itzg erald, Associate General Counsel
M arvin S. G o o d frie n d , Vice President
Robert L. H etzel, Vice President
D avid B. H um p hrey , Vice President and

John S. F rain, Operations Officer
W illia m J. T ig n an e lli, Operations Officer
John I. T urnb u ll II, Financial Services Officer

C h a r lo t t e
A lbert D. T ink e le n be rg , Senior Vice President
Sam uel W . Pow ell, Jr., Vice President
Robert F. Stratton, Vice President
Jefferson A . W alk e r, Vice President
W o ody Y. C a in , Assistant Vice President
M arsha H. M a larz, Assistant Vice President
Francis L. R ic h b o u rg , Assistant Vice President
Harry B. Sm ith, Assistant Vice President

Payments System Adviser
Thomas M . H um p hrey , Vice President
W illia m D. M artin III, Vice President and General Counsel
Joseph C . R am ag e , Vice President
John W . Scott, Vice President
R. W ay n e S tancil, Vice President
A ndrew L. Tilton, Vice President
W alte r A . V arvel, Vice President
Jack H. W yatt, Vice President
K em per W . Baker, Jr., Assistant Vice President
W illia m H. B enner, Assistant Vice President
Jackson L. B lan ton, Assistant Vice President
W illia m A . B ridenstine, Jr., Assistant General Counsel
B radford N. C a rd e n , Assistant Vice President
M ich ae l Dotsey, Research Officer
Betty M . F ahed, Assistant Vice President
Sh aron M . H aley, Assistant Vice President and Secretary
A nato li K u prian ov , Research Officer
H aro ld T. Lipscom b, Assistant Vice President
Yash P. M ehra, Research Officer
D a vid L. M e ng le , Research Officer
Joseph F. Morrissette, Assistant Vice President
M ich ae l W . Newton, Assistant Vice President
V irg iniu s H. Rosson, Jr., Assistant Vice President
G . R o n a ld Scharr, Assistant Vice President
G a ry W . Schem m el, Assistant Vice President
Jesse W . Seam ster, Assistant Vice President
James R. Slate, Assistant General Counsel
Roy H. W e b b , Research Officer
B obby D. W y n n , Assistant Vice President
F loyd M . D ickin so n, Jr., Examining Officer
E ugene W . Johnson, Jr., Examining Officer
Thomas P. K ellam , Accounting Officer
Edgar A . M a rtin d a le III, Budget and Control Officer
Susan Q . M o o re , Personnel Officer
Law rence P. Nuckols, Examining Officer
M arsha S. Sh u le r, Planning Officer
W illia m F. W h ite , Examining Officer
H ow ard S. W h ite h e a d , Cash Operations Officer
A rthu r J. Zohab, Jr., Examining Officer
D a v id B. Ayres, J r . , General Auditor
H . Lewis G arre tt, Assistant General Auditor




C u lp e p e r
John G . Stoides, Senior Vice President
James G . D ennis, Assistant Vice President
James J. F lo rin III, Assistant Vice President

C h a r le s t o n
R ich ard L. H opkins, Vice President

C o lu m b ia
Boyd Z. Eubanks, Vice President

C o m p a r a tiv e

F in a n c ia l

S ta te m e n ts

C O N D IT IO N

D e c e m b e r 31, 1987

D e c e m b e r 31, 1986

G o l d certifica te a cco u n t

9 3 3 .0 0 0 .0 0 0 .0 0

9 5 9 .0 0 0 .0 0 0 .0 0

S p e cia l D ra w in g Rights certifica te a cco u n t

4 6 1 .0 0 0 .0 0 0 .0 0

4 6 1 .0 0 0 .0 0 0 .0 0

A s s e ts :

C o in

6 3 ,4 3 4 ,9 4 1 .8 5

8 0 ,8 9 0 ,5 4 6 .7 9

L oans to d e p o sito r y institutions

1 8 1 .2 1 2 .0 0 0 .0 0

2 3 1 .0 0 0 .0 0 0 .0 0

F ed era l a g e n c y ob lig a tion s

6 3 8 ,2 2 2 ,0 1 6 .0 6

6 7 2 ,8 8 7 ,5 94.81

U. S. g o v e rn m e n t securities:
Bills

9 ,0 9 9 ,6 7 3 ,1 6 1 .0 9

8 ,9 1 8 ,9 0 0 ,7 0 5 .4 4

N otes

7 ,0 1 1 ,1 0 3 ,7 7 5 .8 1

5 ,8 5 5 ,0 3 1 ,8 5 0 .6 6

B on d s

2 ,3 8 6 ,3 5 9 ,0 5 2 .2 1

2 ,2 1 0 ,8 2 4 ,5 6 9 .4 8

18,497 ,1 3 5 ,9 8 9 .1 1

1 6 ,9 8 4 ,7 5 7 ,1 2 5 .5 8

C a sh item s in p ro c e s s of c o lle c tio n

4 2 1 ,9 5 6 ,9 7 5 .8 7

7 0 0 ,8 3 0 ,0 8 3 .4 9

Bank p rem ises

1 1 1 ,1 3 6 ,1 4 0 .6 0

9 9 ,6 4 0 ,3 9 9 .5 7

Total U. S. gov ern m en t securities

F urniture a n d eg u ip m e n t, net
O th er assets
Interdistrict settlem ent a cco u n t
A c c r u e d s e r v ic e in co m e
T O T A L A SS E T S

19 ,5 8 4 ,1 1 1 .8 0

2 2 ,2 9 4 ,2 8 4 .8 4

7 6 2 ,8 7 3 ,3 0 8 .7 2

7 3 6 ,5 2 6 ,9 2 0 .6 8

(1 ,7 3 6 ,4 5 4 ,4 3 1 .3 6 )

(1 5 8 ,0 2 1 ,9 4 3 .8 8 )

4,821,828.. 12

4 ,7 6 6 ,0 5 4 .7 7

$ 2 0 ,3 5 7 ,9 2 2 ,8 8 0 .7 7

$ 2 0 ,7 9 5 ,5 7 1 ,0 6 6 .6 5

$ 1 6 ,5 5 0 ,0 3 3 ,1 5 6 .0 0

$ 1 7 ,1 4 9 ,7 3 0 ,8 7 1 .0 0

2 ,9 0 2 ,1 0 0 ,7 6 8 .5 5

2 ,6 4 4 ,7 3 7 ,5 9 4 .3 4

L ia b i li t ie s :
F ed era l R e se rv e notes
D ep osits:
D ep osito ry institutions
F o re ig n

8 ,1 0 0 ,0 0 0 .0 0

7 ,6 5 0 ,0 0 0 .0 0

6 0 ,8 8 5 ,6 8 8 .5 7

4 4 ,6 2 8 ,0 3 5 .0 2

2 ,9 7 1 ,0 8 6 ,4 5 7 .1 2

2 ,6 9 7 ,0 1 5 ,6 2 9 .3 6

D e fe rre d ava ila b ility cash items

3 8 2 ,8 7 4 ,0 7 0 .3 3

5 6 4 ,0 8 1 ,6 3 9 .4 7

O th er liabilities

2 2 6 ,0 8 9 ,3 9 7 .3 2

1 8 2 ,4 4 0 ,026.8 2

2 0 ,1 3 0 ,0 8 3 ,0 8 0 .7 7

2 0 ,5 9 3 ,2 6 8 ,1 6 6 .6 5

C a p ita l p a id in

1 1 3 .9 1 9 .9 0 0 .0 0

1 0 1 .1 5 1 .45 0.00

S u rplu s

1 1 3 .9 1 9 .9 0 0 .0 0

1 0 1 .1 5 1 .45 0.00

$ 2 0 ,3 5 7 ,9 2 2 ,8 8 0 .7 7

$ 2 0 ,7 9 5 ,5 7 1 ,0 6 6 .6 5

O th er
Total d e p o sits

T O T A L LIABILITIES

C a p it a l A c c o u n t s :

T O T A L LIABILITIES AN D C A P IT A L A C C O U N T S

18




E A R N IN G S A N D E XPE N SE S
E a r n in g s :
L oans to d e p o s ito ry institutions
Interest o n U. S. g ov ern m en t secu rities
F o re ig n cu r re n cie s
In co m e from se rv ice s
O th er ea rn in g s
Total cu rren t ea rn in gs

1987
$

1 ,7 3 6 ,4 7 4 .6 7
1 ,3 7 4 ,1 3 8 ,0 5 8 .6 3
1 8 ,5 9 2 ,5 9 0 .5 6
5 3 ,2 5 4 ,1 9 6 .4 8
7 5 7 ,8 0 9 .3 9

1986
$

8 ,6 8 3 ,4 1 8 .5 4
1 ,3 9 3 ,7 9 5 ,9 3 1 .9 3
2 0 ,0 8 1 ,5 9 9 .4 6
5 2 ,0 8 2 ,1 2 2 .8 9
7 9 5 ,7 6 8 .6 8

$ 1 ,4 4 8 ,4 7 9 ,1 2 9 .7 3

$ 1 ,4 7 5 ,4 3 8 ,8 4 1 .5 0

O p e ra tin g e x p e n se s
C ost of ea rn in g s cred its

8 5 ,2 2 4 ,5 1 9 .5 5
8 ,2 5 3 ,7 3 7 .3 9

8 2 ,4 3 2 ,1 8 2 .1 7
7 ,8 0 9 ,2 0 1 .4 1

Net e x p e n se s

9 3 ,4 7 8 ,2 5 6 .9 4

9 0 ,2 4 1 ,3 8 3 .5 8

$ 1 ,3 5 5 ,0 0 0 ,8 7 2 .7 9

$ 1 ,3 8 5 ,1 9 7 ,4 5 7 .9 2

3 ,5 3 9 ,9 1 4 .0 2
9 7 ,4 3 0 ,9 5 5 .5 1
5 5 ,8 0 8 .8 0

5 ,7 9 7 ,5 3 6 .0 6
10 0 ,5 0 2 ,1 5 0 .5 7
191,38 2.70

1 0 1 ,0 2 6 ,6 7 8 .3 3

1 0 6 ,4 9 1 ,0 6 9 .3 3

0
1 7 ,4 7 4 .4 4

0
4 ,3 4 6 ,6 0 4 .5 4

1 7 ,4 7 4 .4 4

4 ,3 4 6 ,6 0 4 .5 4

+ 1 0 1 ,0 0 9 ,2 0 3 .8 9

+ 1 0 2 ,1 4 4 ,4 6 4 .7 9

3 ,4 4 4 ,1 8 5 .7 2
4 ,4 0 5 ,7 0 0 .0 0
1 4 ,9 8 4 ,8 8 7 .0 4

0
5 ,0 1 9 ,1 0 0 .0 0
1 6 ,5 9 5 ,0 1 7 .7 6

$ 1 ,4 3 3 ,1 7 5 ,3 0 3 .9 2

$ 1 ,4 6 5 ,7 2 7 ,8 0 4 .9 5

$

$

E xpenses:

C U RREN T NET E A R N IN G S
P r o f it a n d L o s s
A d d itio n s to cu rren t net ea rn in g s:
Profit o n sales of U. S. g o v e rn m en t secu rities (net)
Profit o n fo r e ig n e x c h a n g e transactions
A ll oth er
Total a d d ition s
D ed u ctio n s from cu rren t net e a rn in g s:
Losses o n fo r e ig n e x c h a n g e transactions
A ll oth er
Total d e d u c tio n s
Net ad d ition s or d e d u c tio n s
C ost of u n re im b u rse d T reasury se rv ice s
A ssessm en t for e x p e n se s of B oa rd of G o v e r n o r s
F ed era l R eserv e cu r r e n c y costs
NET EARNINGS BEFORE PAYMENTS TO U .S. TREASURY
D is t r ib u t io n o f N e t E a r n in g s
D iv id en d s p a id
Paym ents to U. S. T reasury (interest on F ederal Reserve notes)
T ran sferred to surplus
TOTAL

6 ,4 3 1 ,0 0 1 .2 8
1 ,4 1 3 ,9 7 5 ,8 5 2 .6 4
1 2 ,7 6 8 ,4 5 0 .0 0

$ 1 ,4 3 3 ,1 7 5 ,3 0 3 .9 2

5 ,7 9 8 ,9 7 4 .8 3
1 ,4 4 9 ,5 8 9 ,6 3 0 .1 2
1 0 ,3 3 9 ,2 0 0 .0 0

$ 1 ,4 6 5 ,7 2 7 ,8 0 4 .9 5

SURPLUS A C C O U N T
B a la n ce at c lo s e of p re v io u s year
A d d itio n o f profits for year

$

1 0 1 ,1 5 1 ,4 5 0 .0 0
1 2 ,7 6 8 ,4 5 0 .0 0

$

9 0 ,8 1 2 ,2 5 0 .0 0
1 0 ,3 3 9 ,2 0 0 .0 0

B A L A N C E A T C L O S E O F CURREN T YEAR

$

1 1 3 ,9 1 9 ,9 0 0 .0 0

$

1 0 1 ,1 5 1 ,4 5 0 .0 0

C A P I T A L S T O C K A C C O U N T (R epresenting am ount p a id in, w hich is; 50 % of am o u nt subscribed)
B a la n ce at c lo s e of p re v io u s year
Issu ed d u rin g the year

$




$

$

1 1 3 ,9 1 9 ,9 0 0 .0 0

9 0 ,8 1 2 ,2 5 0 .0 0
1 2 ,1 6 6 ,1 0 0 .0 0
10 2 ,9 7 8 ,3 5 0 .0 0
1 ,8 2 6 ,9 0 0 .0 0

1 1 5 ,0 9 0 ,2 5 0 .0 0
1 ,1 7 0 ,3 5 0 .0 0

C a n c e lle d d u rin g the year
B A L A N C E A T C L O S E O F CURREN T YEAR

1 0 1 ,1 5 1 ,4 5 0 .0 0
1 3 ,9 3 8 ,8 0 0 .0 0

$

1 0 1 ,1 5 1 ,4 5 0 .0 0

S u m m a r y

o f

O p e r a tio n s

O p e r a t io n

N um ber

A m o u n t ($ th o u s a n d s )

1987

1986

1987

C u r r e n c y an d c o in p r o c e s s e d :
C u r r e n c y r e c e iv e d a n d verified
C u rre n cy v e rifie d a n d d estro y e d
C o in r e c e iv e d an d v e rifie d

1 .787.276.000
5 3 8 ,4 6 3 ,0 0 0
3 .2 5 4 .1 0 2 .0 0 0

1,531,7 6 3 ,0 0 0
5 9 8 ,2 6 6 ,0 0 0
3 ,3 8 3 ,0 0 0 ,0 0 0

2 2 ,2 9 0 ,7 0 9
3 ,705,281
507 ,2 9 4

19,365,754
4 ,7 8 8 ,9 1 9
513,816

C h e ck s h a n d led :
C o m m e r c ia l— p r o c e s s e d *
C o m m e r c ia l— p a c k a g e d items
U .S . g o v e rn m e n t

1 ,351 ,5 3 2 ,0 0 0
2 7 7 ,9 6 1 ,0 0 0
69 ,0 6 4 ,0 0 0

1,305,6 0 2 ,0 0 0
262,1 6 5 ,0 0 0
71,4 6 8 ,0 0 0

8 8 4 ,1 7 3 ,7 2 7
9 9 ,4 1 2 ,0 0 0
121,768,095

8 3 1,67 4,02 4
9 5 ,46 3,00 0
119,571,103

107,000
164,680

154,000
174,736

81,251
4 51,837

88,504
549,155

10,439,834
3 98,414

11,134,827
358,246

2,339,871
2 ,4 2 5 ,5 7 0 ,4 1 9

3,216,607
2 ,2 5 0 ,0 4 0 ,4 1 3

4 ,3 1 8 ,8 8 6

4 ,2 2 8 ,9 2 2

7 ,6 2 9 ,8 1 0 ,0 0 0

6 ,3 5 4 ,2 1 7 ,0 0 0

181,570,000

190,676,000

840,804

887,483

1,478

2 ,792

6 ,1 6 6 ,7 0 0

2 8,594 ,200

C o lle c tio n s items h a n d le d :
U .S . g ov ern m en t c o u p o n s p a id
N on cash items
U .S . g o v ern m en t secu rities issued,
red eem ed , and exch an ged :
D efin itive
B ook-E ntry
F unds transfers sent a n d r e c e iv e d
F o o d stam ps r e d e e m e d
Loans a d v a n c e d
‘ E x c lu d in g checks on this Bank.

O p e r a tin g
I te m

E x p e n se s
A m o u n t ( d o lla r s )
1987

1986

P erson n el
M aterials a n d su p p lies
E gu ipm ent
S h ip p in g
Travel
C om m u n ica tion s
B u ild in g
O th er

5 5 ,7 8 4 ,8 3 4
4 ,3 4 7 ,0 4 4
13,405,628
6 ,4 4 6 ,8 5 8
1,897,198
884,222
9 ,7 8 3 ,8 6 7
5 ,3 8 5 ,0 3 2

5 4 ,1 1 8 ,4 9 0
4 ,1 1 7 ,4 9 0
12,797,856
6 ,5 7 6 ,5 9 3
1,665,257
999,950
9 ,3 4 9 ,9 9 7
4 ,8 8 7 ,9 3 2

R e co v e rie s
C on tra e x p e n se
S h ared cost d istrib u ted
S h ared cost r e c e iv e d

- 4 ,6 5 5 ,6 8 3
- 2 2 8 ,8 4 2
-3 ,3 4 2 ,1 3 6
2,794,721

-4 ,0 9 2 ,2 0 1
- 2 0 1 ,8 5 9
- 2 ,9 8 1 ,7 4 9
2 ,8 1 4 ,2 9 9

Total e x p en ses
R eim bu rsem en ts

9 2 ,5 0 2 ,7 4 3
- 7 ,2 7 8 ,2 2 3

9 0 ,0 5 2 ,0 5 5
-7 ,6 1 9 ,8 7 3

8 5 ,2 2 4 ,5 2 0

8 2 ,4 3 2 ,1 8 2

Net e x p en ses

20




1986







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