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Banking Industry To Face Familiar Challenges in 2006

Saturday, April 1, 2006

Check 21, the search for new revenues, fraud prevention and credit risk are among the major challenges-and opportunities-facing the Federal Reserve and financial institutions in 2006.

Check image exchange will continue to pick up speed. Momentum in the adoption of electronic check processing promises to be one of the most significant developments in the payment industry, as many more community and large banks are expected to begin using Check 21 (under the 2003 Check Clearing for the 21st Century Act).

New revenue-growth opportunities will be explored. Thanks to Check 21, "remote capture" is intriguing many financial institutions with its possibilities. Check images could be captured at far-flung locations for electronic processing-potentially eliminating the need to transport paper checks to a processing center and enabling banks to appeal to customers previously beyond their physical reach.

Security and risk mitigation will remain a top priority. With more electronic banking and fewer paper checks, financial institutions must continue to develop ways to prevent electronic fraud.

Emerging macroeconomic trends will also affect banks' risk exposure. Credit risk promises to be a hot topic in 2006. Federal regulatory agencies are working on guidance for the very latest products in the residential mortgage market. At the same time, lending institutions are urged to create their own policies and procedures to best protect themselves.

For more information, read the full story, "What to Expect in 2006," in the January issue of FedFocus under Publications/Press Releases at