The Federal Reserve Bank of Boston is pleased to release its audited financial statements for 2021, along with a summary of our 2021 impact on the regional and national economy amid the continuing challenges of the COVID-19 pandemic.

The Bank’s accomplishments in 2021 are thanks to the people who make it such a dynamic organization: its dedicated employees. Despite the pandemic’s ebbs and flows, Bank employees adapted, showed real strength and agility, and remained steadfast in their commitment to serving the public through the various activities of the Federal Reserve. We are especially grateful to our on-site employees, who ran our critical services that cannot be performed remotely.

This year’s financial statements show that the Boston Fed remitted $1.54 billion to the U.S. Treasury – a part of the $109 billion the Federal Reserve System as a whole remitted to the U.S. Treasury during 2021. Every year, the Federal Reserve remits excess earnings to the U.S. Treasury after expenses, dividends, and reservation of an amount to maintain surplus.

A few highlights of 2021 are summarized below:

Supporting the economy through the pandemic emergency

The Main Street Lending Program is an emergency lending facility that was established – by the Federal Reserve in 2020 and administered by the Boston Fed – to support small and medium-sized businesses and nonprofit organizations by lending funds that act as a bridge to a post-pandemic recovery. The program stopped purchasing new loan participations in January 2021, but the Boston Fed will continue to manage the program’s repayments until underlying assets mature or are sold. As of its closing, the program funded 1,830 loans through 319 lenders with 2,400 borrowers in 48 states and territories. In 2021, the Boston Fed published a series of findings on the program’s outcomes to better inform policymakers should a similar program be required for future emergencies.

Payments innovation

The Boston Fed has a long history of encouraging and leading innovation in the U.S. payments system, and the FedNow^SM Service and Project Hamilton made significant progress in 2021. The Project Hamilton team continued exploring the technological implications of a general purpose central bank digital currency (CBDC) and released a technical whitepaper, which was accompanied by open-source code for a hypothetical CBDC platform. The FedNow Service published technical messaging specifications and established a pilot program to support development, testing and adoption of the service, which will officially launch in 2023.

Monetary policy and economic research

As the pandemic continued to disrupt the U.S. economy, the Bank’s economists provided research that focused on deepening our understanding of the economic implications of the pandemic while also returning to long-standing policy issues, for example, inflation and inflation expectations, the choice of an inflation target, and the transmission channels of monetary policy, and how to conduct policy in the context of the new monetary policy framework.

Additional research considered programs established to mitigate the economic impact of the pandemic, including the Main Street Lending Program and the Paycheck Protection Program. Other topics germane to individual economic prosperity, including racial wealth disparities and the student test score gaps, were considered. The Bank also hosted two economic conferences, one on the implications of high leverage for financial instability and the economy, the other on racial disparities in the current economy.

Milestones for the Working Places initiative

The Boston Fed’s Working Places initiative supports local collaborative efforts that focus on improving economic opportunity in cities and rural communities in New England. In 2021, $1.75 million in grants were received by 22 teams across the First District. These grant funds were awarded by private and public partners, thanks to the Working Places initiative. The Bank also launched Leaders for Equitable Local Economies (LELE), an initiative created to empower local leaders who take on the critical work of improving economic systems in Massachusetts’ smaller cities.

Welcoming a new leader in 2022

Former Boston Fed President and CEO Eric Rosengren announced his retirement in September 2021 following 36 years of public service at the Bank (14 as president). The Bank’s Board of Directors formed a search committee, consisting of directors who are not members of the banking industry. They conducted a nationwide search and identified a broad and diverse pool of highly qualified candidates. Last month, the search committee announced Susan M. Collins will be the Boston Fed’s next president and CEO, effective July 1, 2022.

The Boston Fed continued to show its resilience in 2021, and it remains committed to promoting a strong, inclusive economy for the First District and the United States.

Sincerely,
Kenneth Montgomery
Interim President and CEO

Federal Reserve Bank of Boston Financial Statements
Federal Reserve Banks Combined Financial Statements

The Federal Reserve Board engaged KPMG to audit the 2021 combined and individual financial statements of the Reserve Banks and the financial statements of the five limited liability companies (LLCs) that are associated with the Board of Governors’ actions to address the coronavirus pandemic, of which four LLCs are consolidated in the statements of the Federal Reserve Bank of New York and one LLC is consolidated in the statements of the Federal Reserve Bank of Boston.¹

In 2021, KPMG also conducted audits of internal controls over financial reporting for each of the Reserve Banks. Fees for KPMG services totaled $9.8 million, of which approximately $2.3 million were for the audits of the LLCs.² To ensure auditor independence, the Board of Governors requires that KPMG be independent in all matters relating to the audits. Specifically, KPMG may not perform services for the Reserve Banks or affiliated entities that would place it in a position of auditing its own work, making management decisions on behalf of the Reserve Banks, or in any other way impairing its audit independence. In 2021, the Bank did not engage KPMG for any non-audit services.