community depository institutions advisory council meeting ......mar 27, 2017 · creditworthiness...

Community Depository Institutions Advisory Council Meeting

Federal Reserve Bank of New York 33 Liberty Street, New York, New York

March 27, 2017

Agenda

11:00 a.m. Administrative Matters Presentations to the Council Members:

o National Economic Outlook (Richard Peach, Macroeconomic and Monetary Studies)

o Regional Economic Outlook (Jason Bram, Regional Analysis)

o Developments in Payments (Kenneth Isaacson, Wholesale Product Office)

12:30 p.m. Discussion of questions posed by the Board of Governors over lunch

Community Depository Institutions Advisory Council

Discussion Questions March 27, 2017 Meeting

Federal Reserve Bank of New York 11. Current Banking Conditions:

What is the Council’s view of the current condition of, and the outlook for, loan markets and financial markets generally? Please describe any significant changes in the creditworthiness of applicants for loans, loan demand, and lending standards in general.

a. Small Business Lending: Has credit availability for, and demand for credit from,

small businesses changed significantly? Have lending standards for these borrowers changed?

b. Commercial Real Estate Lending: Have there been any changes in the Council’s

view of challenges in the commercial real estate market since the beginning of the year? How are commercial real estate loans performing compared to your expectations?

c. Construction Lending: What is the Council’s view of the availability of credit for

construction and development projects? Have Council members seen any changes in the demand for construction loans since the beginning of the year?

d. Home Mortgage Lending: What changes have Council members seen in the

mortgage market since the beginning of the year? Is a trend developing among community banks to increase, decrease, or cease home mortgage originations, and if so, what are the likely causes for and effects of this trend?

e. Consumer Lending: What changes have Council members seen in consumer

lending?

f. Agricultural Lending: Have there been any changes in agricultural lending?

g. Deposits: Have Council members seen any changes in local deposit markets?

3

2. Economic Discussion:

a. Overall Economic Conditions: How do Council members assess overall economic conditions in their regions?

b. Particular Indicators:

i. Inflation: Are the prices of products and services rising more or less

quickly (or declining more) than in the recent past? Are the prices for the products and services Council members purchase rising more or less quickly?

ii. Housing: How have house prices changed in recent months? Have there been any changes in housing activity overall in Council members’ regions?

iii. Labor Markets: How have the labor markets in which Council members

operate changed in recent months? In particular, assess the degree of job loss (how much and in which industries). What changes to wages have Council members observed in the past year?

iv. Consumer Confidence: Is the Council seeing signs of improved consumer

confidence? What is the outlook for consumer credit losses? 3. Payment Systems: Although the introduction of the EMV (Europay, MasterCard, and

Visa) chip is aimed at reducing in‐person fraud, it does not address online card fraud, which continues to grow. What has been the Council’s experience with the EMV rollout in reducing in‐person fraud in the United States? How does the Council view steps taken by the industry to address online credit fraud?

4. Examination Practices: Have Council members experienced problems with recent

examinations? In particular, have examination practices constrained access to credit by creditworthy borrowers? What steps can be taken to address the Council’s concerns?

5. Regulatory Matters and the Future of Banking: How are recent changes in the

regulatory landscape affecting community depository institutions’ ability to continue to provide services to their customers? What has been the effect on the industry generally?

6. Additional Matters: Have any other matters affecting community depository

institutions emerged that Council members want to present at this time?

US Macro OverviewMarch 27, 2017

Overview• The US economy appears to be regaining its footing after suffering a

significant shock beginning in mid to late 2014.

• US labor market is now showing classic signs of being at or near full employment.

• Core inflation has edged higher over the past year but remains somewhat below the FOMC’s objective.

– Rent inflation continues to edge higher.– Health care price inflation has moved higher. – The rate of decline of core goods prices has begun to slow as past dollar appreciation

has largely worked its way through the system.

• Big policy question is whether fiscal stimulus could boost the economy’s underlying trend growth rate.

2

-5-4-3-2-10123456

-5-4-3-2-10123456

2000 2002 2004 2006 2008 2010 2012 2014 2016

Growth of Real GDPFour Quarter Percent Change Four Quarter Percent Change

Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.3

60

80

100

120

140

0

200

400

600

800

1000

1200

1400

1600

1800

2011 2012 2013 2014 2015 2016

Broad Trade‐WeightedExchange Value of US $(right axis)

Nominal Trade-Weighted Value of US$ and Rig CountActive Oil Rigs Index

Source: Federal Reserve Board and Baker Hughes Note: Shading shows NBER recessions.

Rig Count(left axis)

4

30

40

50

60

70

-20

-15

-10

-5

0

5

10

15

20

2000 2002 2004 2006 2008 2010 2012 2014 2016

12 Month % Change Index

Source: Institute for Supply Management,Federal Reserve Board via Haver Analytics Note: Shading shows NBER recessions.

ISM Manufacturing Index

(Right Axis)

Industrial Production: Manufacturing

(Left Axis)

Manufacturing and ISM Manufacturing Index

5

70

75

80

85

90

95

100

105

110

70

75

80

85

90

95

100

105

110

2000 2002 2004 2006 2008 2010 2012 2014 2016

Index, 2008:Q1 = 100 Index, 2008:Q1 = 100

Source: National Sources via Haver AnalyticsNote: Peripheral includes Italy, Portugal and Spain.

Greece

Peripheral

Rest of Euro Area

Real GDP in the Euro Area

6

0

1

2

3

4

0

1

2

3

4

2007 2009 2011 2013 2015 2017

Annual % change Annual % change

Source: Bureau of Labor Statistics via Haver Analytics Note: Shading shows NBER recessions.

Average Hourly Earnings

Employment Cost Index

Growth of Average Hourly Earnings and ECI

7

58

60

62

64

66

2

4

6

8

10

12

2006 2008 2010 2012 2014 2016

Labor Market IndicatorsPercent Percent


Unemployment Rate(Left Axis)

Labor Force Participation Rate

(Right Axis)

Employment to Population Ratio

(Right Axis)

8

Change in Labor Force Participation Rate by Age and Sex

All Ages Ages 16 to 24 Ages 25 to 54 Ages 55 and over

Total Men Women Total Men Women Total Men Women Total Men Women

2006 66.2 73.5 59.4 60.6 63.3 57.9 82.9 90.6 75.5 38.0 44.9 32.3

2016 62.8 69.2 56.8 55.2 56.5 53.8 81.3 88.5 74.3 40.0 46.2 34.7

Change -3.4 -4.3 -2.6 -5.4 -6.8 -4.1 -1.6 -2.0 -1.2 2.0 1.3 2.3

Contribution to Change in Participation Rate(Percent)

100.0 61.4 38.9 42.0 24.8 17.2 145.8 83.3 62.6 -87.8 -46.7 -40.9

Memo: Share of Population

2006 100.0 48.3 51.7 16.1 8.2 8.0 54.6 26.9 27.6 29.3 13.2 16.0

2016 100.0 48.3 51.7 15.2 7.6 7.5 49.6 24.4 25.2 35.2 16.3 18.9

Change 0.0 0.0 0.0 -1.0 -0.5 -0.5 -5.0 -2.6 -2.4 6.0 3.0 2.9

9

-2

-1

0

1

2

3

4

5

-2

-1

0

1

2

3

4

5

2000 2002 2004 2006 2008 2010 2012 2014 2016

12 Month % Change 12 Month % Change

Source: Bureau of Economic Analysis via Haver Analytics Note: Shading shows NBER recessions.

Total PCE

Core PCE

FOMC Objective

PCE Deflator

10

-3

-2

-1

0

1

2

3

4

5

-3

-2

-1

0

1

2

3

4

5

2000 2002 2004 2006 2008 2010 2012 2014 2016

CPI Inflation: Core Goods and Core Services12 Month % Change 12 Month % Change

Source: Bureau of Labor Statistics Note: Shading shows NBER recessions.

Total Core CPI

Core Goods

Core Services

11

-1

0

1

2

3

4

5

6

7

8

9

10

11

12

2000 2002 2004 2006 2008 2010 2012 2014 2016

Rental Vacancy Rate and Rent of Primary ResidencePercent 12 Month % Change

Source: Census Bureau, BLS via Haver Analytics Note: Shading shows NBER recessions.

Rental Vacancy Rate

(Left Axis)

Rent of Primary Residence(Right Axis)

12

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

1995 1998 2001 2004 2007 2010 2013 2016

Personal Consumption Expenditures: Health Care Price Index

12 Month % Change 12 Month % Change


17% of total PCE deflator20% of core PCE deflator

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Actual and Expected Fed Funds TargetPercent Percent

Source: Federal Reserve Board

Actual March 8, 2017 March 22,2017

14

-0.75

0

0.75

1.5

2.25

3

3.75

4.5

-0.75

0

0.75

1.5

2.25

3

3.75

4.5

1965 1975 1985 1995 2005 2015

Labor Force and Nonfarm Business Sector Real Output20-Qtr %Change-annualized 20-Qtr %Change-annualized


Civilian Labor Force: 16+

Nonfarm Business Sector: Real Output per Hour of All

Persons

15

Private Nonfarm Business Sector

1987-2015 1987-1990 1990-1995 1995-2000 2000-2007 2007-2015(compound annual

growth rates)

Output 2.9 3.3 3.0 5.0 2.8 1.3

Hours Worked 0.9 1.7 1.3 2.1 0.2 0.2

Labor Productivity (1) 2.0 1.6 1.6 2.9 2.6 1.2

(percentage points)

Contribution to Labor Productivity from:

TFP (2) 0.9 0.7 0.5 1.5 1.4 0.4Labor Composition (3) 0.3 0.2 0.5 0.2 0.2 0.3Capital Intensity (4) 0.8 0.7 0.6 1.2 1.0 0.5

(1) Output per hour worked.

(2) Output per combined units of labor input and capital services.(3) Labor composition multiplied by labor's share of current dollar costs.

(4) Capital services per hour multiplied by capital's share of current dollar costs.

Note: Labor composition measures the effects of shifts in the age, gender, and educational attainment of the work force on the efficiency of hours worked.

Source: U.S. Department of Labor, Bureau of Labor Statistics, "Preliminary Multifactor Productivity Trends-2015",May 5, 2016.

16

0

2

4

6

8

10

12

14

0

2

4

6

8

10

12

14

1965 1975 1985 1995 2005 2015

Real Private Investment Share of Real GDPPercent of GDP Percent of GDP


Nonresidential Fixed Investment

Structures

Equipment

Intellectual Property

17

00.20.40.60.811.21.41.61.822.22.4

00.20.40.60.8

11.21.41.61.8

22.22.4

1965 1975 1985 1995 2005 2015

Private Investment Over DepreciationRatio Ratio


Equipment

Structures


18

-2

0

2

4

6

8

10

-2

0

2

4

6

8

10

1965 1975 1985 1995 2005 2015

Growth of Net Private Nonresidential Capital StockY/Y Growth Rate Y/Y Growth Rate


Net Stock

EquipmentStructures


19

Reference Charts

20

20-years 15-years 10-years 5- years

Q1 -0.9 -0.8 -1.4 -0.6

Q2 0.6 0.4 0.8 0.1

Q3 0.3 0.5 0.6 0.8

Q4 0.1 -0.1 0.0 -0.2

Average Percentage Point Deviation from Average Quarterly Real GDP Growth Rate

21

170

190

210

230

250

55.35.65.96.26.5

2014 2015 2016 2017

-4-20246810

00.5

11.5

22.5

33.5

44.5

Personal Saving Rate and Energy Price IndexEnergy Price IndexPersonal Saving Rate

Sources: Bureau of Economic Analysis and Bureau of Labor Statistics via Haver Analytics

Personal Saving Rate (left axis)

Energy Price Index (right axis)

12-month Change (left axis)

Monthly Change (right axis)

12-month Percent Change Monthly Percent Change (Annualized)Real Personal Consumption Expenditures

Note: Shading shows NBER recessions.22

0

0.2

0.4

0.6

0.8

1

1.2

1.4

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1950 1960 1970 1980 1990 2000 2010

Household Liabilities/Disposable Personal IncomeRatio Ratio

Source: Federal Reserve Board23

Note: Shading shows NBER recessions.

0

10

20

30

40

50

60

70

80

90

100

0

10

20

30

40

50

60

70

80

90

100

1951 1961 1971 1981 1991 2001 2011

Debt by Sector: Households and Nonprofit InstitutionsPercentage of GDP

Source: Haver; Author’s Calculations. Note: Shading shows NBER recessions.

Households

Mortgage

Consumer Credit

Nonprofit Institutions

Percentage of GDP

24

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

1980 1985 1990 1995 2000 2005 2010 2015

Household Financial Obligation RatioRatio Ratio

Source: Federal Reserve Board25

60

61

62

63

64

65

66

67

68

69

70

60

61

62

63

64

65

66

67

68

69

70

1965 1975 1985 1995 2005 2015

U.S. Homeownership RateHomeownership Rate Homeownership Rate

Source: Census Bureau via Haver Analytics Note: Shading shows NBER recessions.26

0

10

20

30

40

50

60

70

80

90

Total 16-24 25-34 35-44 45-54 55-64 65-74 75+Age Cohorts

Homeownership Rate1994 2004 2015

Source: Census Bureau27

Single Family Housing Market

3

4

5

6

7

8

9

10

11

12

13

-20

-15

-10

-5

0

5

10

15

20

25

2000 2002 2004 2006 2008 2010 2012 2014 2016

12 Month % Change Months

Source: CoreLogic, National Association of Realtors, via Haver Analytics Note: Shading shows NBER recessions.

Single Family House Price Index

(Left Axis)Months’ Supply

(Right Axis)

“Normal” Range for Months’ Supply

28

Housing Starts

0

400

800

1200

1600

2000

0

50

100

150

200

250

300

350

400

450

2000 2002 2004 2006 2008 2010 2012 2014 2016

Thousands, 3 MMA Thousands, 3 MMA

Source: Census Bureau via Haver Analytics Note: Shading shows NBER recessions.

Total Multifamily(Left Axis)

Single Family(Right Axis)

29

500

550

600

650

700

750

800

500

550

600

650

700

750

800

1999 2001 2003 2005 2007 2009 2011 2013 2015

Credit Score at Mortgage OriginationCredit Score Credit Score

Source: FRBNY / Consumer Credit Panel Note: Shading shows NBER recessions.

Median

10th Percentile

25th Percentile

30

0

0.005

0.01

0.015

0.02

0.025

0.03

0

0.005

0.01

0.015

0.02

0.025

0.03

1968 1978 1988 1998 2008

Housing Starts and Existing Homes Sales Per CapitaUnits Units

Source: BLS, Census Bureau, NAR Note: Shading shows NBER recessions.

Housing Starts

Existing Home Sales

.0178(average over 1968-2003)

.009(average over 1968-2003)

31

-20

-15

-10

-5

0

5

10

15

-20

-15

-10

-5

0

5

10

15

2000 2002 2004 2006 2008 2010 2012 2014 2016

Real Business Fixed Investment4Q % Change 4Q % Change


-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

60 65 70 75 80 85 90

Quarterly data1980Q1 – 2016Q4

Equipment Investment Spending and Capacity UtilizationReal Business Investment in New Equipment (% Change – Year to Year)

Real Business Investment in New Equipment (% Change – Year to Year)

Source: Federal Reserve Board, Bureau of Economic Analysis

Manufacturing Capacity Utilization (Percent of Capacity)

2016 Q4:

(75.0, 0)

33

-8

-6

-4

-2

0

2

4

6

8

10

-8

-6

-4

-2

0

2

4

6

8

10

2000 2002 2004 2006 2008 2010 2012 2014 2016

Real Government Consumption and Gross Investment4 Quarter % Change 4 Quarter % Change

Source: Bureau of Economic Analysis Note: Shading shows NBER recessions.

Federal(Left Axis)

State & Local(Right Axis)

34

0

20

40

60

80

100

FY1960 FY1970 FY1980 FY1990 FY2000 FY2010 FY20200

20

40

60

80

100

14

16

18

20

22

24

26

FY1960 FY1970 FY1980 FY1990 FY2000 FY2010 FY202014

16

18

20

22

24

26

Outlays

Receipts

Sources: Bureau of Economic Analysis and Congressional Budget Office

Federal Receipts, Outlays, and Debt(CBO Current Law Baseline)

Average 1962‐2007 19.7%

Average 1962‐2007 17.6%

Gross Federal Debt

Debt Held by the Public

Intergovernmental Accounts

Fed Holdings

Percent of GDP Percent of GDP

Percent of GDP Percent of GDP

January 2017 CBO Baseline

January 2017CBO Baseline

35

-1

0

1

2

3

4

5

6

-1

0

1

2

3

4

5

6

2012 2013 2014 2015 2016 2017

Aggregate Weekly Hours WorkedY/Y % Change Y/Y % Change

Source: Bureau of Labor Statistics Note: Shading shows NBER recessions.

Goods-Producing Industries

Private Service-Providing

Industries

36

0

2

4

6

8

10

12

400 450 500 550 600 650 7000

2

4

6

8

10

12

Source: Bureau of Economic Analysis and Federal Reserve Board

Households’ Net Worth as a Percent of Disposable Income

2006Q1 to present

Note: Fitted line is from 1983Q1 to 2005Q4.

Personal Saving Rate and Household Net WorthPersonal Saving Rate (Percent) Personal Saving Rate (Percent)

2016Q4 (650, 5.6)

1983Q1 to 2005Q4

2006Q1 (643, 3.8)

37

Overview of the Regional Economy

Jason Bram, Research Officer

Presentation to the Community Depository Institutions Advisory Council (CDIAC)March 27, 2017

The views expressed here are those of the presenter and do not necessarily represent those of the Federal Reserve Bank of New York or the Federal Reserve System.

80

90

100

110

120

130

Index of Coincident Economic Indicators (CEI)

Index (Dec2007=100)140

Source: Federal Reserve Bank of New York.

2007 2008 2009

Shading indicates NBER recession

2010 2011 2012 2013 2014 2015 2016 2017 2018

New York

New Jersey

New York City

Puerto Rico

Regional Economic Activity

Jan

Dec

1

0

2

4

6

8

10

12

1990


1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

New York State

New York City

United States

New Jersey

Unemployment RatesSeasonally Adjusted

Feb

Source: Bureau of Labor Statistics and Moody's Economy.com.

Jan

Percent

2

55

60

65

70

1990


1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

New York State

New York City

United States New Jersey

Labor Force ParticipationSeasonally Adjusted

Feb


Jan

Percent

3

Private-Sector Job TrendsPercent Change From Previous Peak to January 2017

DownFlat to up 3%Up 3% to 7%Up more than 7%


DownFlat to up 3%Up 3% to 7%Up more than 7%

4

Recent Private-Sector Job GrowthPercent Change From January 2016 to January 2017

DownFlat to up 1.25%Up 1.25% to 2%Up more than 2%

Source: Bureau of Labor Statistics and Moody's Economy.com. 5

88

92

96

100

104

108

116

112

120

2007 2008 2009


2010 2011 2012 2013 2014 2015 2016 2017 2018

New York

New York City

United States

New Jersey

Puerto Rico

Private-Sector EmploymentSeasonally Adjusted Index

Index (Dec2007=100)


Feb

Jan

6

88

92

96

100

104

108

116

112

120

2007 2008 2009


2010 2011 2012 2013 2014 2015 2016 2017 2018

Orange-RocklandWestchester

New York City

United States

Fairfield


Index (Dec2007=100)


Feb

Jan

7

88

92

96

100

104

108

2007 2008 2009


2010 2011 2012 2013 2014 2015 2016 2017 2018

United States

Upstate

Utica-Rome

Albany


Index (Dec2007=100)120

116

112


Feb

Jan

8

88

92

96

100

104

108

2007 2008 2009


2010 2011 2012 2013 2014 2015 2016 2017 2018

United States

Rochester

Buffalo

Syracuse


Index (Dec2007=100)120

116

112


Feb

Jan

9

NYC Finance and SecuritiesSectors’ Share of NYC Employment and Earnings

Source: U.S. Bureau of Labor Statistics (QCEW). 10

3%5% 5% 5% 4% 5%

11%

22%25%

19%10%

10%8% 8%

7%10%

11%

10%

11%

12%

0%

10%

20%

30%

40%

1972 1987 2001 2007 2015 1972 1987 2001 2007 2015

NYC EarningsNYC Employment

Finance Ex-SecuritiesSecurities

Shading indicates timebetween securities

peak and trough

SecuritiesEmployment

(left axis)Total EmploymentMinus Securities

(right axis)

60

90

120

150

180

210

240

270

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 20202,500

2,750

3,000

3,250

3,500

3,750

4,000

4,250

NYC Securities EmploymentSeasonally Adjusted Levels

Jan

Source: Bureau of Labor Statistics, Moody's Economy.com, and FRBNY calculations.

Thousands Thousands

11

Total EmploymentMinus Securities

(right axis)

SecuritiesEmployment

(left axis)

160

180

200

220

240

260

JAN09 JAN10 JAN11 JAN12 JAN13 JAN14 JAN15 JAN16 JAN17 JAN183,500

3,660

3,820

3,980

4,140

4,300

Recent NYC Securities EmploymentSeasonally Adjusted Levels

Thousands Thousands

Source: Bureau of Labor Statistics, Moody's Economy.com, and FRBNY calculations.

Jan

12

NYC Tech Employment in Select IndustriesNumber of Payroll Jobs, 2007 and 2015

13

3,272

4,568

1,507

5,382

4,444

39,706

13,174

4,028

10,508

5,412

7,746

28,496

62,556

15,509

Computer Manufacturing

Electronic Shopping

Software Publishers

ISPs; Search Portals;Data Processing

Internet Pub, Web Search Portals Etc.

Computer SystemsDesign & Related

Scientific R & D Services2007

2015

Source: U.S. Bureau of Labor Statistics (QCEW) and FRBNY Staff Calculations.

Trends in NYC Tech EmploymentEmployment Levels in Thousands

14

0

25

50

75

100

125

150

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Thousands

NYC Tech

Manhattan Tech

Jun

Source: U.S. Bureau of Labor Statistics (QCEW) and FRBNY Staff Calculations.

-60

-40

-20

0

20

40

2007 2008 2009

FRBNY Business Surveys, Current Conditions

Diffusion Index60



2010 2011 2012 2013 2014 2015 2016 2017 2018

Empire StateManufacturing Survey

Business LeadersSurvey

Current Economic Conditions

Mar

15

-60

-40

-20

0

20

40

2007 2008 2009

FRBNY Business Surveys, Conditions Six Months Ahead

Diffusion Index60

Empire StateManufacturing Survey



2010 2011 2012 2013 2014 2015 2016 2017 2018

Business LeadersSurvey

Future Economic Conditions

Mar

16

0

10

20

30

40

50

60

70

80

90

100

Jan 2017 Jan 2016 Jan 2017 Jan 2016

Per

cen

tag

e D

istr

ibu

tio

n o

f R

esp

on

ses

Survey Conducted in …

Up more than 4 percent

Up 2‐4 percent

Up 2 percent or less

No change

Decrease

Empire State ManufacturingSurvey

Business LeadersSurvey (Service Firms)

Expected Percent Change in Salaries for Existing Workers

17Source: FRBNY Supplementary Survey Jan. 2017 https://www.newyorkfed.org/medialibrary/media/survey/business_leaders/2017/2017_01supplemental.pdf

Expected Percent Change in Salaries for New Workers

18Source: FRBNY Supplementary Survey Jan. 2017 https://www.newyorkfed.org/medialibrary/media/survey/business_leaders/2017/2017_01supplemental.pdf

0

10

20

30

40

50

60

70

80

90

100

Jan 2017 Jan 2016 Jan 2017 Jan 2016

Per

cen

tag

e D

istr

ibu

tio

n o

f R

esp

on

ses

Survey Conducted in …

Up more than 4 percent

Up 2‐4 percent

Up 2 percent or less

No change

Decrease

Empire State ManufacturingSurvey

Business LeadersSurvey (Service Firms)

Regional Recap• Unemployment is at multi-year lows across much of the region.

• NYC has led the region in job growth; New Jersey has lagged, Fairfield County has been weak, and PR remains depressed.

• Upstate, the Buffalo, Rochester and Albany areas have seen moderate job creation, but other areas have lagged.

• The securities industry, which typically drives NYC’s economy has been flat during this rapid expansion.

• The city’s tech sector has picked up some of the slack.

• Businesses have grown more upbeat about the economy and have become a bit more inclined to raise wages.

19

Supplementary Charts on Housing Markets

60

70

80

90

100

110

2006 2007 2008 2009


2010 2011 2012 2013 2014 2015 2016 2017 2018

United States

NYC Metro

Fairfield

Westchester

Rockland

Home PricesCoreLogic Home Price Index, Seasonally Adjusted

Index (Mar2006=100)120

Source: CoreLogic Home Price Index (including distressed sales).

Jan

60

80

100

120

140

2006 2007 2008 2009

United States


2010 2011 2012 2013 2014 2015 2016 2017 2018

Suffolk

Kings

NassauQueens

Manhattan


Index (Mar2006=100)160


Jan

60

70

80

90

100

110

120

2006 2007 2008 2009


2010 2011 2012 2013 2014 2015 2016 2017 2018

United States

AlbanyRochester

Upstate NY

Buffalo


Index (Mar2006=100)130


Jan

March 27, 2017

Developments in Payments

Speaker: Ken Isaacson, Senior Vice President, FRBNY

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Strategies for Improving the Payments System (SIPS) Accomplishments and next steps

FRBNY Wholesale Product Office initiatives in support of SIPS ISO 20022 payments messaging format Cross-border payments Enhanced settlement

Questions

Agenda

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In 2015, the Federal Reserve System initiated a multi-year effort to enhance U.S. payment systems, as outlined in the Strategies for Improving the U.S. Payment System (SIPS) paper.1

These strategies focus on advancing the desired outcomes of speed, efficiency, security, international, and collaboration.

Two task forces were launched in early 2015 to engage with stakeholders – The Faster Payments Task Force (FPTF); and The Secure Payments Task Force.

In January 2017 – The Fed published a progress report on the accomplishments to date and future plans.2

The FPTF published part one of its final report –– Describes task force background and processes, the payments landscape, and the

benefits of faster payments.2

In mid-2017, the FPTF will publish part two of its report to – Assess faster payment solution proposals submitted by task force members to achieve a

ubiquitous faster payment capability in the United States; Identify gaps to achieve the desired outcome; and Make recommendations for further industry actions to close gaps.

Strategies for Improving the Payments System

1,2The original SIPS paper, 2017 progress report, and part one of the Task Force report can be found here: https://fedpaymentsimprovement.org/two-years-five-strategies-continuous-progress-strategies-for-improving-the-u-s-payment-system-turns-two/

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The Faster Payments Task Force key accomplishments include – Established an independent team to assess faster payments proposals against

faster payments effectiveness criteria. Analyzed potential challenges to successful faster payments implementation such

as▫ provider interoperability, rules and standards, governance, adoption, safety and security.

The Secure Payments Task Force launched work to address the industry’s most pressing payment system security issues such as – identity management, data protection, and fraud and risk information sharing.

Several SIPS strategies are being advanced by existing Federal Reserve financial services business lines. FRBNY, as operator of wholesale services, is focused on ISO 20022, cross-

border payments, and enhanced settlement.

The Federal Reserve is analyzing potential further actions to fully achieve the SIPS desired outcomes.

Achieving SIPS Strategies

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A new message format is coming to the Fedwire Funds Service and CHIPS. By 2020 (preliminarily – likely to change)

Standard message formats for wire transfer payments provide opportunities for – Richer data (e.g., purpose codes, extended remittance information). Easier compliance with evolving regulatory requirements. Efficiencies from a common format instead of multiple proprietary formats (e.g.,

reduced mapping & market practices).

The Fed is engaging with both domestic and global industry groups to plan for the new format.

Work is underway to finalize the implementation timeline, specify enhancements, map to legacy formats, and create usage guidelines/implementation guide. Will be published to Fedwire Funds Service participants in Q4 2017, with a

comment period to follow.1

1Periodic updates about the ISO 20022 initiative are published on the FedPayments Improvement website. https://fedpaymentsimprovement.org/payments-efficiency/iso-20022/

ISO 20022

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The Fed’s SIPS paper asserts that there are opportunities to improve the speed, convenience, and efficiency of international payments. About 30% of Fedwire Funds Service payments are international.

In February 2017, SWIFT implemented the Global Payment Innovation (SWIFT gpi) initiative, which is designed to improve the speed, transparency and end-to-end tracking of cross-border payments.

In March 2017, the Fed implemented a market practice to carry gpi-related information in the Fedwire Funds Service message format.

The Fed will evaluate additional enhancements that could improve the speed, efficiency or transparency of cross border payments – to complement the SWIFT gpi payment tracking service.

The Fed will continue to – facilitate industry dialogue on international payments; and offer training opportunities to use the Fedwire Funds Service for cross-border

payments.

Cross-Border Functionality

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Real time retail payments are coming. Typically 24x7x365. Sometimes requiring receiving bank to pay the receiver before being paid by the payer’s bank. Credit exposures between banks can build – especially on weekends.

The National Settlement Service (NSS) is a multilateral deferred net settlement system where interbank credit exposures can be extinguished.

We are pursuing a three-phase approach for expanding the hours of NSS.

Phases 1 and 2 of that effort are now complete and the WPO stands at-the-ready to open NSS as early as 9 pm on the prior calendar date.

Phase 3 is framed as an exploration of what it would take to implement 24x7 and/or weekend hours.

A decision to implement Phase 3 NSS hours will depend on – Industry demand; and Evolving alternative settlement solutions

▫ E.g., 24x7 Fedwire, joint accounts, more frequent same-day ACH cycles

Enhanced Settlement Services

community depository institutions advisory council meeting ......mar 27, 2017 · creditworthiness...

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