Fed FAQs: Frequently Asked Questions about the Federal Reserve
Structure and Functions of the Fed
The Federal Reserve (known as the Fed, for short) is the nation’s central bank, committed to fostering a sound financial system and a healthy economy. Our public service mission is to strengthen the economy and our communities by fostering the stability, integrity and efficiency of our nation’s monetary, financial and payments systems.
Established by Congress in 1913, the Federal Reserve promotes a healthy economy and financial stability by:
- Setting the nation’s monetary policy to promote our economic goals of maximum employment, stable prices, and moderate long-term interest rates.
- Promoting financial system stability by monitoring financial system risks and engaging at home and abroad to support a healthy economy for U.S. households, communities, and businesses.
- Supervising and regulating financial institutions to help ensure the safety and soundness of individual institutions and monitoring their impact on the financial system as a whole. The Federal Reserve also provides financial services to depository institutions, the U.S. government and foreign official institutions.
- Fostering a safe, efficient, and accessible payments system for U.S. dollar transactions and electronic fund transfers.
- Promoting consumer protection and community development by engaging with individuals, as well as community and business leaders, to better understand local economic conditions, issues, and the impacts of financial services policies and practices on consumers and communities.
We also provide economic and financial education resources to support teachers, students, and consumers.
The Federal Reserve System includes 12 independent regional Reserve banks located across the United States, as well as the Federal Reserve Board of Governors in Washington, D.C.
Each of the 12 Federal Reserve banks is an operating arm of the Federal Reserve System. These banks have a total of 24 branches. The banks and branches carry out various functions, including operating a nationwide payment system, distributing the nation’s currency and coin, supervising and regulating member banks and bank holding companies, and serving as the banker for the U.S. Treasury.
Federal Reserve banks are located in Boston, New York City, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.
The Federal Reserve Bank of St. Louis serves the Eighth Federal Reserve District, which includes all of Arkansas, eastern Missouri, southern Indiana, southern Illinois, western Kentucky, western Tennessee and northern Mississippi. We have branch offices in Little Rock, Louisville and Memphis.
The Federal Reserve System is composed of a central, governmental agency—the Board of Governors in Washington, D.C.—and 12 regional Federal Reserve banks.
The seven members of the Board of Governors are nominated by the U.S. president and confirmed by the Senate. A full term is 14 years. Appointments are staggered so that one term begins every two years, on Feb. 1 of each even-numbered year. A member who serves a full term may not be reappointed; however, a member who is appointed and confirmed to serve the unexpired portion of a term may later be reappointed to a full term. All terms end on their statutory date regardless of the date on which the member is sworn into office.
The chairman and the vice chairman of the Board are named by the president from among the members and are confirmed by the Senate. They serve four-year terms. A member’s term on the Board is not affected by his or her status as chairman or vice chairman.
The Federal Open Market Committee (FOMC) is the Fed’s principal monetary policymaking body and comprises the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four other Reserve bank presidents on a rotating basis. All 12 Reserve bank presidents participate in FOMC policy deliberations, whether or not they are voting members. The FOMC typically meets eight times a year.
Learn about the FOMC voting rotation and view voting members by year.
Accountability
The Federal Reserve Act seeks to balance political accountability and operational independence for the Federal Reserve System. We are nonpartisan and decentralized by design to conduct monetary policy that is in the long-run, best interest of the economy.
The Federal Reserve is accountable to the American people through comprehensive audits and reviews, as well as regular reports to Congress. We are open and transparent about our operations—publishing our balance sheets each week, releasing Federal Open Market Committee (FOMC) minutes after each meeting, and speaking frequently to the public and media.
The members of the Board of Governors are nominated by the president of the United States and confirmed by the Senate. In turn, the Board of Governors has oversight authority for the entire Federal Reserve System.
The Fed is extensively audited, as required by federal law. Fed activities are also periodically audited by the U.S. Government Accountability Office (GAO), which is the auditing arm of Congress. For example, the GAO released a report on Federal Reserve bank governance. In addition, the Board of Governors publishes the Fed’s balance sheet on a weekly basis, rather than quarterly as many companies do. The weekly report includes a statement of condition of each Reserve bank.
The Fed’s monetary policy decisions are not audited in the traditional sense. To provide for the independence of the central bank and avoid political interventions in interest rate and other monetary policy decisions, the Fed’s monetary policy activities are, by law, exempted from congressional audits by the Government Accountability Office. The Fed has taken many steps over the years to increase transparency about its monetary policy deliberations.
Reserve Bank Boards of Directors
Yes. As part of the Federal Reserve Act, each of the 12 Reserve banks is subject to the supervision of a nine-member board of directors.
Directors play a critical role in the effective functioning of the Federal Reserve System—supervising the administration of their respective Reserve bank’s operations, performing an important corporate governance function, and providing insights to help inform FOMC deliberations.
Directors are an important connection between the Reserve banks and their communities. As part of their role, directors are expected to contribute to the Federal Reserve System’s understanding of the diverse economic conditions across their District and the effect of those conditions on the overall economy.
The Federal Reserve Act provides that Reserve bank directors are divided into three classes—Class C, Class B, and Class A. Each class comprises three directors.
- Class C and Class B directors represent the public with due, but not exclusive, consideration to the interests of agricultural, commerce, industry, services, labor, and consumers.
- The Federal Reserve Board of Governors appoints Class C directors. Class C directors may not be an officer, director, employee, or stockholder of any bank—or a bank, financial, or thrift holding company. The Board of Governors also designates a board chair and deputy chair for each Reserve Bank from among that Bank’s Class C directors. The chair must have experience or familiarity with banking or financial services.
- Federal Reserve member banks elect Class B and Class A directors. Class B directors are elected to represent the public, and they may not be an officer, director, or employee of any bank. Class A directors are elected to represent the member banks. They are prohibited from participating in the appointment of Reserve Bank presidents and first vice presidents, as well as decisions related to the performance and compensation of presidents and first vice presidents. In addition, they may not participate in the selection, appointment, and compensation of all Reserve Bank officers whose primary duties involve supervisory matters.
Board of Governors’ policy prohibits Reserve banks from providing confidential supervisory information to any director and excludes all directors from participating in any bank supervisory matters.
Bank Supervision and Regulation
Banking supervision is government oversight of banks. Banking supervision at the federal level is carried out by three agencies:
- The Federal Reserve
- The Office of the Comptroller of the Currency (OCC)
- The Federal Deposit Insurance Corporation (FDIC)
State banking agencies also supervise certain banks. Each agency supervises banks organized under different types of legal charters.
The Fed has primary supervisory responsibility for two major categories of banking organizations: state-chartered banks and their subsidiaries that are members of the Federal Reserve System, and bank holding companies, including financial holding companies and any of their nonbank subsidiaries. As a part of the Gramm-Leach-Bliley Act, the Fed’s role as an “umbrella” supervisor of bank holding companies was expanded to include financial holding companies and their nonbank subsidiaries. A bank holding company is simply a company that may own many banks. A bank holding company can choose to obtain a financial holding company status so that it may engage in a broad array of financially related activities.
Bank examiners do not run or manage banks. Rather, they work to understand banks’ operations, major risks, how well banks manage those risks and whether banks have sufficient financial and managerial resources. When a bank does not manage its risk well or have sufficient financial resources, examiners require the bank to take corrective action.
- To determine a depository or financial institution’s regulator, view the Fed System’s National Information Center.
- Learn more about the Fed’s role in supervision and regulation.
The Federal Reserve acts or makes recommendations with respect to notices by individuals seeking to acquire controlling interests in state member banks and bank holding companies. Part of the Federal Reserve’s role is to respond appropriately when it determines that a state member bank or bank holding company has problems that affect the institution’s safety and soundness or is not in compliance with laws and regulations. In some cases, the Fed may need to take an informal supervisory action or a formal enforcement action. The Fed’s actions are designed to address concerns about a bank’s operations and to encourage banks and their affiliated parties to follow the law.
Congress has assigned to the Fed Board of Governors responsibility for implementing the Federal Reserve Act, which established the Federal Reserve System, and certain other laws pertaining to a wide range of banking and financial activities. The Board implements those laws in part through its regulations, which are codified in Title 12, Chapter II, of the Code of Federal Regulations (12 CFR 201 et seq.).
Community Development
The Fed’s community development work helps improve economic outcomes in low- and moderate-income communities. Promoting community development and consumer protection is one of the Fed’s core functions as the U.S. central bank.
These efforts help drive economic growth by ensuring that people in every community have opportunities to participate in the economy and prosper—including those who may face barriers related to income, race, ethnicity, gender or geography.
The community development function arose from the Fed’s responsibilities as a bank supervisor. As part of supervising banks, we help ensure they comply with fair lending laws and the Community Reinvestment Act (CRA).
Under the CRA, banks are required to meet the credit needs of residents and businesses in the communities where they operate, including lower-income neighborhoods. To support these efforts, community development staff conduct research and outreach to understand community conditions and economic disparities.
The insights we gain also help to inform Fed leaders on monetary policy decisions to support an economy that works for everyone. The Fed has a mandate from Congress to promote maximum employment and stable prices. To meet these policy goals, we must understand how people from all walks of life experience the economy and how policy decisions affect their experiences.
All 12 Federal Reserve banks work with a broad range of community partners to expand access to economic opportunity and improve outcomes for lower-income people. We bring stakeholders together to identify key challenges and practices to address them. We conduct and share research and we identify emerging issues that affect underserved populations.
Each Reserve bank tailors our community development function to respond to the economic needs of the region we serve. Our community development staff work on a variety of issues. Examples include workforce development, affordable housing, access to financial services, small business development and efforts to revitalize urban/rural communities.
Payments and Financial Services
The Federal Reserve provides services to help the nation’s payment system run efficiently. Through the Federal Reserve banks’ cash services operations, the Fed distributes currency and coin to financial institutions. The Fed’s retail banking services consist primarily of check clearing operations and electronic banking services. The Fed also offers a service called the automated clearinghouse, commonly known as the ACH, which is used most often to process low-dollar, preauthorized, recurring, retail transactions such as direct deposit of payroll and government benefits, payment of mortgage loans, insurance premiums and utility bills, and corporate cash management.
Besides these retail services, the Fed also offers wholesale services—those that are mostly for business-to-business transactions. This activity is conducted using the Fed’s electronic network, FedWire®. In addition to this network, the New York Fed handles all foreign electronic transfers, which can be sent anywhere in the world.
Finally, as the government’s fiscal agent, the Fed provides a variety of services to the U.S. Treasury as well as to other federal and federally sponsored agencies.
The FedNow® Service, introduced in July 2023, is a safe and efficient instant payments infrastructure that operates around the clock, 365 days a year. It enables financial institutions of all sizes to offer customers the ability to send and receive money immediately, providing receivers immediate access to funds.
Through the service, funds settle between participating financial institutions instantly, which means no buildup of interbank obligations or short-term credit risk. The FedNow Service provides a springboard for financial institutions to offer innovative instant payment solutions and help them meet the growing demand for these services. The FedNow Service modernizes the U.S. payment infrastructure and provides a range of use cases and benefits to financial institutions, individuals and businesses.
As an interbank payment system, the FedNow Service operates alongside other longstanding Federal Reserve payment services, including Fedwire® and FedACH®. The Federal Reserve is working with the more than 9,000 banks and credit unions across the country to support the widespread availability of this service for their customers over time.
Consumer Information
Federal Reserve Consumer Help, launched in 2007, is a centralized operation of the Federal Reserve System that assists consumers in filing complaints involving financial institutions. The mission is to promptly and courteously guide consumers with complaints about financial institutions to the appropriate agency for help. It also addresses consumer questions about federal consumer protection laws and regulations.
The Board of Governors offers a monthly listing of outstanding consumer credit levels (consumer debt).
The Fed offers information about debit and credit cards, as well as information about shopping for or obtaining credit, maintaining credit, disputing unfair credit transactions and resolving billing disputes.
Contacts and Other FAQs
Please send your question to MediaInquiries@stls.frb.org.
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