Federal Reserve Governor Christopher Waller has proposed a significant overhaul of the operational structure for the Fed system’s 12 regional banks, advocating for the centralisation of key business functions. Mr Waller, who chairs the Fed board’s committee overseeing regional reserve banks, highlighted the necessity of acting swiftly in response to rapid technological advancements, including artificial intelligence. He stressed the importance of moving towards a “System mindset” by centralising operations into national lines of business, rather than allowing individual Reserve Banks to manage their infrastructure locally.
The Federal Reserve, the central bank of the United States, comprises 12 regional Reserve Banks that collectively employ approximately 20,000 individuals nationwide. These banks manage various financial services and support the nation’s monetary policy. Mr Waller outlined two potential models for reshaping these functions. The first involves “standardisation with centralised System leadership,” which would centralise major support functions such as human resources, IT, finance, procurement, and facilities, while largely maintaining current local staffing and physical footprints.
However, Mr Waller expressed a preference for a second, more extensive centralisation approach. He suggested this model could lead to “lower levels of employment” at some Reserve Banks in the future, prompting a need to “rethink the physical footprint” of these institutions, similar to past adjustments when check clearing services ceased. His remarks, delivered at the Brookings Institution, focused strictly on operational reforms and did not touch upon the economic outlook, interest rates, or changes to the Fed’s monetary policy decisions. He affirmed that each bank president should retain an independent voice in rate-setting meetings.
