Message from the First Vice President
2005 Annual Report - Operations Report
Published May 1, 2006 | May 2006 issue
In the coming years, the Federal Reserve System faces a complex, dynamic and uncertain outlook as it seeks to fulfill its mission to foster the stability, integrity and efficiency of the nation's monetary, financial and payment systems. Advances in technology, declining check volumes, further consolidations in the banking and financial payments industries, and increased emphasis on corporate governance pose significant challenges for the Federal Reserve in carrying out its responsibilities.
In response to these challenges, the Federal Reserve Bank of Minneapolis has remained steadfast in its execution of its strategic plan, which includes financial and operational strategies aimed at ensuring that all System objectives are met while maximizing the Bank's operational efficiency and quality of service delivery. The Bank's efforts in executing its strategic plan have been guided by rigorous analysis, rapid decision-making and the pursuit of operational excellence given the public trust it must maintain. The Bank's many and varied accomplishments in 2005 speak to our effectiveness in executing our strategic plan.
- The Bank's financial performance exceeded plan in 2005. Overall, expenses were below budget, revenues exceeded plan and District Check met all cost targets. Most operations, including those managed on behalf of the System, met their key performance metrics and high priority objectives. Achieving these results is noteworthy given the challenges posed by declining check volumes, implementation of infrastructure changes to accommodate electronic payment alternatives and increased competition.
- In 2005, the Bank continued its leadership of the Federal Reserve System's payments policy-making arm, the Financial Services Policy Committee (FSPC). Notable results included the completion of an analysis of settlement and depository institution accounting as part of the Federal Reserve Electronic Payments Services initiative, oversight of Check 21 implementation including operational readiness and new product offerings, achievement of 2005 full-cost recovery across priced services, and critical support to the analysis and changes made to the Private Sector Adjustment Factor and Return on Equity calculations, which impact the Federal Reserve System's consolidated financial statements. The Bank received favorable feedback on the effectiveness of its leadership and support of the FSPC from other Reserve Banks.
- During the year, the Bank successfully completed the multi-year Treasury Retail Securities consolidation on behalf of the U.S. Treasury. The consolidation, which was completed within budget and ahead of schedule, resulted in the transfer of Savings Bond and TreasuryDirect operations from five Reserve Banks to Minneapolis and the hiring and training of 104 employees. Minneapolis is now one of two national consolidated sites, which handle all retail Treasury securities activities assigned to the Federal Reserve System.
- The Bank's Supervision, Regulation and Credit Division pursued strategies focused on ensuring operational excellence and improving critical analysis, quality and performance in response to a rapidly changing and increasingly complex financial services industry. An area of particular focus was strengthening staff expertise through the field-testing and review of the Federal Reserve System's new Bank Secrecy Act manual.
- The Bank was selected as the host site for the Learning Management Support Office, which has responsibility for implementing and supporting FedLearn, the System's enterprise standard for tracking learning progress, delivering eLearning, and other training and development functionality. Notable accomplishments included the adoption of a deployment support structure by business line and Reserve Bank staff, installation of the FedLearn test environment and configuration of the FedLearn application.
- In concert with the Federal Reserve System's enterprise risk management strategies, the Bank expanded its risk identification and mitigation efforts and enhanced its review and documentation of internal controls related to safeguarding assets and preventing fraud. The Bank also implemented the System's new Information Security Manual and contributed to System efforts to improve preparedness for catastrophic events caused by terrorist acts or pandemic outbreaks.
- The Bank's strategic plan emphasizes its work environment as a key component in attracting and retaining a highly skilled, diverse staff capable of achieving the Bank's goals and objectives. In 2005, the Bank hired a consultant to conduct a Bankwide employee opinion survey regarding the quality of the work environment. Overall survey results were positive and validated that employees perceive the Bank as a welcoming and inclusive place that values diversity. Employees also rated the Bank highly in regard to its business ethics, benefits and work/life balance.
- The Bank pursued several initiatives as part of its continuing commitment to advance research, economic and financial literacy, and increase awareness of community development issues. The Bank's policy contributions included the publication of a number of scholarly articles by the Bank's economists and advisers, special initiatives to promote early childhood development and public outreach to promote understanding of community development issues. Noteworthy articles covered a variety of topics, including mechanisms for maintaining credible public policies, measuring the effects of taxes and regulation on equity values, explaining differences in productivity and economic growth among countries and assessing the reliability of real business cycle models.
The Bank's success in 2005 is attributed to the unwavering dedication and discipline of our employees and our Board of Directors. Working as a team, with our strategic plan as our guide, we have positioned the Bank to respond to uncertainty while also fulfilling its mission to foster stability, integrity and efficiency in the nation's monetary, financial and payment systems.
James M. Lyon
First Vice President