Design and Implementation of a New Check Clearing System for the Philadelphia Federal Reserve District

Sidney W. Hess
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Sidney W. Hess: Management and Behavioral Science Center, The Wharton School, University of Pennsylvania

Interfaces, 1975, vol. 5, issue 2-part-2, 22-36

Abstract: In 1972 Federal Reserve Banks were ordered to provide overnight clearing services for all intra-district checks. Each District's new system required specification of ---number, location and capacity of processing centers, and ---transportation network including time tables. Check flow was simulated by linking sub-models of ---transportation ---check volume by individual commercial bank ---commercial bank behavior as to choice among Fed, correspondent bank, or local group clearing ---facility sizing to handle anticipated workload. Performance measures include total costs, service provided, and checks late.It was concluded that an expansion of the existing Philadelphia facility was feasible and optimal. The new system began operation in February 1973.A more important study benefit was the demonstration to the Fed of the advantages of taking a comprehensive and systematic view of their decision-making. Five in-house operations research groups have since been formed within the Federal Reserve System.

Date: 1975
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