G. Watts Humphrey,
Jerry L. Jordan,
Sandra Pianalto,
   first vice president
David H. Hoag,
   deputy chairman


When people think about the Federal Reserve Bank of Cleveland, most often they are considering our responsibilities for conducting monetary policy or supervising commercial banking organizations. Sometimes we are recognized for our community-based activities, such as the Cleveland Residential Mortgage Credit project, which we wrote about in last year’s Annual Report.

Rarely does the public pay much attention to our role in the nation’s payments system. This is ironic, since the largest number of our employees work in operations geared to processing checks, shipping cash, executing electronic payments, and servicing the U.S. Treasury’s financial needs. In another sense, however, I am gratified that our payments-related activities go unnoticed, because the inattention signals a high level of confidence that the operations are functioning very well.

Though we are pleased with our progress in delivering reliable and efficient payments services, we recognize that the industry is changing. Payments in the United States are slowly evolving from paper-based to electronic-based transactions. But recent developments in technology, interstate banking and branching, bank consolidation, and the entry of new competitors in the payments industry provide a basis for thinking that the pace of change will quicken.

This year’s essay explores the payments systems through the unique perspectives of its many participants, including the Federal Reserve. For some, these changes will be threatening; for others, the changes will provide exciting opportunities. At the Federal Reserve Bank of Cleveland, we believe that constructive participation in the payments system requires an understanding of both its current challenges and its prospects.

 Last year, we achieved significant results throughout the Bank. We completed and occupied an Operations Center adjacent to our main building in downtown Cleveland. This state-of-the-art facility will enable the Bank’s check, data processing, cash, electronic payments, and information technology functions to provide superior products and services to our customers. We were able to complete the move without any adverse consequences for our customers. Renovation of our historic main building began in earnest after the completion of the Operations Center, and we are on schedule to finish renovating and occupying the building in time for the Bank’s seventy-fifth anniversary this August.

We also embarked on Transformation 2000, a multiyear initiative led by 150 employees to critically examine everything that we do, how we do it, and why we do it. Through the transformation process, we are identifying outmoded practices, replacing them with new activities, and learning how to work better with one another and with our customers. The skills and tools that our employees have gained will enable us to continually improve our operations in payments, banking supervision, and monetary policy. One of the key initiatives directly resulting from the effort was the consolidation of our Pittsburgh office’s currency processing into Cleveland and the relocation of the Bank’s noncash operations to the Jacksonville branch of the Federal Reserve Bank of Atlanta.

Further demonstrating our interest in improving the payments system, Sandra Pianalto, first vice president and chief operating officer of our Bank, served as staff director of the Committee on the Federal Reserve in the Payments Mechanism, a group appointed by Federal Reserve Chairman Alan Greenspan to examine the Federal Reserve’s role in the payments system. Sandy provided leadership in many aspects of the project; her guidance, influence, and expertise undoubtedly contributed to the Committee’s success.

All of the past year’s successes have been guided by the 23 directors of our Cincinnati, Cleveland, and Pittsburgh offices, as well as by the members of our Business and Community Bank Advisory Councils. I thank them for their valuable, dedicated service and expert counsel. I would particularly like to acknowledge Jerry A. Grundhofer, chairman, president, and CEO of Star Banc Corporation, who completed his term on the Cincinnati Board, and Christine J. Toretti, president of the S.W. Jack Drilling Company, who served on the Pittsburgh Board.

Finally, I would like to express my personal gratitude to the officers and staff of the Federal Reserve Bank of Cleveland, whose tireless efforts over the past year enabled us to accomplish so much. The entire Bank truly rose to the challenge of meeting demanding annual performance goals while the special building, transformation, and Rivlin Committee projects were under way. The creativity, energy, and commitment of all of our employees have made 1997 a successful year and have positioned us well to meet the challenges of the future.

Jerry L. Jordan