Capital Brief: Fed Report on Payments Role Expected

The Federal Reserve Board today is expected to recommend that the central bank remain an active participant in the retail payments system.

Fed officials declined to discuss the report in-depth before its release. But Fed Vice Chairman Alice M. Rivlin told Congress this summer that the central bank had rejected proposals to privatize the payments system. Instead, she said, the Fed was leaning toward maintaining the status quo.

"We expect her to announce that the Federal Reserve will provide check and ACH service," said Viveca Y. Ware, director of payments systems at the Independent Bankers Association of America. "That is welcome news to community banks. Without the Fed providing these services, there would be areas of the country without service."

During the last year, Ms. Rivlin chaired a commission that compiled a list of five options for the Fed's future involvement in the payments system. They varied from exiting the business immediately to investing in innovative technologies. The commission traveled to 12 cities this summer to interview bankers about the options and began drafting its report this fall.

The retail payments system is big business for the Fed. It cleared 15.5 billion checks, 84 million wire transfers, and 2.3 billion automated clearing house transactions in 1996. It received nearly $820 million in revenue and spent about $780 million on the system.