Waller: Centralize Fed back-office functions

Waller outlined a plan to enhance the efficiency of Federal Reserve Bank operations by distinguishing between geographically unique and system-wide functions.

He identified monetary policy votes, research, community outreach, supervision, and discount window operations as responsibilities that must remain locally run within each District.

In contrast, functions like information technology, human resources, financial management, enterprise risk management, and payments, which provide critical services to the banking system and U.S. Treasury, can be standardized or even centralized across the entire Federal Reserve System.

Waller argued that this approach would reduce operating costs and improve overall risk management, delivering consistent services while wisely using public resources and supporting the Fed's independence.

Waller addressed concerns that his proposal might undermine the Federal Reserve's regional design and Reserve Bank independence.

He clarified that the framework, developed by the presidents, allows Reserve Banks to make independent decisions as a collective group, rather than individually.

This preserves regionalism through unique District activities, ensuring Board oversight remains supervisory, not decision-making.

The plan distributes key responsibilities across the System, leveraging local expertise.

A single Reserve Bank will lead centralized functions as a "contractor" for others, maintaining operational independence by ensuring collective control over operations.

This requires a shift to a "System first, Bank second" mindset and a new governance model.