Federal Reserve Governor Christopher Waller today proposed that the central bank consolidate core functions such as human resources and IT across the 12 Reserve Banks instead of each bank being responsible for its own operations.
Speaking at the Brookings Institution in Washington, D.C., Waller outlined two scenarios for a streamlined Fed system. Functions such as payroll, HR, vendor payments and IT are increasingly platform-based, technology-driven and scale-sensitive, he said.
“These functions are not delivered better or more efficiently with geographic dispersion,” Waller said. “Nor are they unique to a district. They improve with integration, scale and standardization. With that comes lower operating costs, risk reduction and greater savings for the American taxpayer.”
The first scenario outlined by Waller leaves the footprint of the 12 Reserve Banks largely intact but places each operational function under a single leader for the entire Fed system.
The second scenario would physically relocate the functions at each Reserve Bank to a small number of operation centers in low-cost cities. Waller also said the Fed could look into outsourcing some functions.
“It’s hard to justify a lot of expensive labor just because you’re in a high-cost city,” Waller said during a Q&A.
