Federal Reserve Board Governor Waller says Reserve Bank presidents developed framework to centralize back office operations

In a speech, Federal Reserve Board Governor Christopher Waller said Reserve Bank presidents have developed a framework to standardize and centralize Federal Reserve System back-office functions while keeping district-specific activities under local control. He said the approach is intended to lower operating costs and improve risk management without weakening the Federal Reserve's regional structure, with locally run responsibilities continuing to include monetary policy support, community outreach and development, supervision, and discount window operations. Under the framework, functions such as information technology, human resources, financial management, enterprise risk management, and payments could be led by a single Reserve Bank and provided across the System under service-level agreements. Individual Reserve Banks would give up day-to-day decision rights over those services, while the Board of Governors would retain oversight of performance and costs rather than take operational decisions. Waller also said the model requires a governance shift away from consensus-based operational decisionmaking and toward a System-first approach. He said the Board and the Reserve Banks have spent the last six months developing the approach, but implementation details still need to be worked out. Waller said he will continue working with Reserve Bank presidents and first vice presidents to move the framework forward, noting that the changes affect critical services including the daily movement of trillions of dollars in payments for commercial banks and the U.S. Treasury.