efficient payments system. this shift away from paper and toward the electronic processing of payments has significant operational and legal implications that all of us need to ponder. i believe that an ongoing dialogue among payments system participants will help us address, in a balanced and thoughtful manner, these important issues that affect the long - term strategic direction of the u. s. financial system. this symposium is a welcome and constructive part of that dialogue.

has already caused the reserve banks to reduce by half the number of offices at which they process paper checks. in 2003, the reserve banks had forty - five checkprocessing offices nationwide, versus the twenty - two they have today and the eighteen that they will have by early 2008. further consolidations are likely as check volumes continue to decline and as checks are increasingly processed electronically. ultimately, perhaps sometime late in the next decade, the reserve banks might process checks at only a single office nationwide. these changes in the federal reserve ’ s check - processing infrastructure will benefit bank customers by entitling them to earlier funds availability on their check deposits, because all checks will eventually become local checks, which are generally subject to a maximum permissible hold period of two business days. this will present risk - management challenges for banks because a bank seldom learns that a local check is unpaid before it must make the funds available to the customer for withdrawal. moreover, while some checks are being collected faster as a result of electronic processing, in the future other checks might be collected more slowly. we have already seen some banks decide to process large - and small - dollar checks differently. specifically, many banks are expediting the collection of larger - dollar checks by taking advantage of the check 21 authority. on the other hand, banks are continuing to collect smaller - dollar checks in paper form, using physical transportation networks, because the value of collecting these smaller - dollar checks faster does not justify the cost of doing so. as larger - dollar checks are increasingly cleared electronically, the use of relatively expensive dedicated check - transportation networks to clear the aggregate value of the remaining checks will be harder and harder to justify economically. as a result, it is quite possible that it will take longer to collect smaller - dollar checks as dedicated, high - cost check - transportation networks are scaled back or eliminated and these checks are transported using slower, less costly means. the federal reserve is now studying whether overall improvements in the check - collection system would be sufficient in the near term to justify the board ’ s use of its authority under the expedited funds availability act to reduce maximum hold periods. 4 the likely slowing of the collection of smallervalue checks could make any change problematic in the near term. nonetheless, as i have already noted, recent and future consolidations of federal reserve check - processing regions have benefited, the expedited funds availability act requires that the board reduce the maximum hold periods to the period of time necessary for the depositary