reserve banks, congress adopted several significant departures from the standard business corporation model. notably, three of each bank's nine directors are selected by the board of governors, which designates one of its appointees as the chairman. three of the directors are elected by the stockholding banks and must represent the public. the remaining three directors are chosen by and represent the member banks. the board of governors is also given general oversight authority relating to the reserve banks and their activities. these characteristics reflect the fact that the reserve banks are structured to carry out public policy objectives set in the federal reserve act, not to advance the interests of their shareholders. consolidation of certain reserve bank functions in recent years, in response to major developments in the financial industry and technology, as well as statutory and regulatory changes, a number of reserve bank functions have evolved from highly localized operations at individual reserve bank offices to more consolidated and centralized functions. this trend is particularly evident in the financial services the reserve banks offer to depository institutions. from the creation of the system, the federal reserve has not only been closely involved in overseeing the nation's payment systems but has also been an important operational component of that system. historically, each reserve bank and branch provided a full range of services to local institutions. in particular, the federal reserve act gave the system the authority to establish a nationwide check - clearing system to minimize inefficiencies and disruptions. the ongoing transformation of our retail payments system, resulting from shifts in consumer behavior and rapid industry innovation, has directly affected the operations of the reserve banks. the number of checks being written has been steadily falling as consumers increasingly take advantage of electronic payments mechanisms. in 2003, for the first time, the number of electronic payments in the united states, such as credit card, debit card, and automated clearinghouse ( ach ) payments, exceeded the number of check payments. a range of data indicates that electronic payments have continued to increase and that check payments have continued to decline. not only are more payments being made electronically, but more check payments are also being processed electronically, in part because of the enactment of the check clearing for the twenty - first century act, commonly known as check 21. 2 as a result of these trends, the reserve banks'check - collection volume has declined. since 1999, the number of checks collected through the reserve banks has fallen by about 30 percent. consequently, the reserve banks have taken major steps to reduce check costs, including reducing the resources devoted to

of the 19 bank holding companies were projected to maintain capital ratios above all four of the regulatory minimum levels – even after taking into account their proposals for capital actions such as dividends, share buybacks, and share issuance in the baseline scenario. the banking sector overall also has substantially improved its liquidity position over the past few years. indeed, large banks in the aggregate have more than doubled their holdings of cash and securities since 2009. large banks have reduced their collective dependence on short - term wholesale funding, and many are flush with retail deposits, which tend to be a more stable funding source. challenges on the liquidity front remain, however : some large firms still rely heavily on wholesale short - term funding ; and the liquidity needs of the banking system as a whole may become somewhat higher for a while as some of the securities issued under the federal deposit insurance corporation ’ s temporary liquidity guarantee program come due, and as the unlimited insurance on noninterest - bearing transaction accounts expires at the end of the year. nevertheless, over time, greater liquid asset positions and reduced dependence on wholesale short - term funding, together with more and bis central bankers ’ speeches better capital, will make the banking sector less susceptible to unexpected disruptions in short - term funding markets. the credit quality of large banks ’ assets is looking better as well, although the improvements have been uneven across types of loans. in the aggregate, delinquency rates on loan portfolios at large banks have declined substantially from their peaks. however, while delinquencies on commercial and industrial ( c & i ) loans and consumer loans have fallen to the lower end of their historical ranges, delinquencies on loans backed by commercial or residential real estate have declined only moderately and remain elevated. the profitability of large banks has been edging up as credit quality has firmed and banks have trimmed noninterest expenses. even so, large banks ’ profitability remains well below the levels that prevailed before the financial crisis began, and banks continue to struggle to expand their revenues. developments that can be traced back to the financial crisis – including a still - weak economy, changes in market conditions and practices, and tighter financial regulations – are clearly important reasons for these trends. community banks play important roles in local economies, and so it is notable that their condition has also improved. their regulatory capital ratios have increased significantly since 2009 and stand well above their recent norms. as has been the case at large banks, del