The Federal Reserve Board of Governors is the main governing body of the Federal Reserve System. The board comprises of a chairman and six members. The current chairman of the Board is Ben Bernanke, whose role as chairman is scheduled to last until January 2014.
The President of the United States has the power to appoint members of the Board of Government. Any such appointment must be carried out with the consent of the Senate. The board members are elected for 14-year terms, with the chairman and vice-chairman of the Board each elected for four-year terms. The appointments are staggered so that one term expires on January 31 of each even-numbered year. Although the Senate must consent to any appointments to the board, they have no further role in the Fed’s policies. However, the Fed must “work within the framework of the overall objectives of economic and financial policy established by the government.” On this basis, the Federal Reserve describes itself as “independent within the government.”
Role and Responsibilities of the Federal Reserve Board
The Board also plays a major role in the supervision and regulation of the US banking system. It has supervisory responsibilities for state-chartered banks that are members of the Federal Reserve System, bank holding companies, the foreign activities of member banks, the US activities of foreign banks, and Edge Act and agreement corporations (limited-purpose institutions that engage in a foreign banking business). The Board and, under delegated authority, the Federal Reserve Banks, supervise approximately 900 state member banks and 5,000 bank holding companies.
The Board’s responsibilities required thorough analysis of domestic and international financial and economic developments. The Board carries out those responsibilities in conjunction with other components of the Federal Reserve System. The Board also supervises and regulates the operations of the Federal Reserve Banks, exercises broad responsibility in the nation’s payment system, and administers most of the nation’s laws regarding consumer credit protection.
Some regulations issued by the Board apply to the entire banking industry, whereas others apply only to member banks. The Board also issues regulations to carry out major federal laws governing consumer credit protection, such as the Truth in Lending, Equal Credit Opportunity, and Home Mortgage Disclosure Acts. Many of these regulations apply to various lenders outside of the banking industry as well as to banks.
Policy regarding open market operations is established by the Federal Open Market Committee (FOMC). However, the Board of Governors has sole authority over changes in reserve requirements, and it must approve any change in the discount rate initiated by a Federal Reserve Bank.
The Board publishes detailed statistics and other information about the Federal Reserve System’s activities and the economy in publications such as the quarterly Federal Reserve Bulletin, the monthly Statistics Supplement, and separate statistical releases.
Chairman of the Board
The Chairman of the Board has a number of other duties, such as occasional meetings with the President of the United States and regular meetings with the Secretary of the Treasury. The Chairman also has formal responsibilities in the international arena. For example, he is the alternate US member of the board of governors of the IMF. He is also a member of US delegations to key international meetings, such the Group of Seven (G7) meetings.
As required by the Federal Reserve Act, the Chairman of the Board of Governors testifies before the Senate Committee on Banking, Housing and Urban Affairs and the House Committee on Financial Services on or about February 20 and July 20 of each year. The Chairman’s testimony addresses the efforts, activities, objectives, and plans of the Board of Governors and the FOMC with respect to the conduct of monetary policy, as well as economic development in the US and the prospects for the future. Concurrently, the Board of Governors must submit a report on these same issues to the House and Senate committees before which the Chairman testifies.
The Board is audited annually by a major public accounting firm. In addition, the Government Accountability Office (GAO) generally exercises its authority to conduct a number of reviews each year to look at specific aspects of the Federal Reserve’s activities. The audit report of the public accounting firm and a complete list of the GAO reviews are available in the Board’s Annual Report, which is sent to Congress during the second quarter of each calendar year. Monetary policy is exempt from audit by the GAO because it is monitored directly by Congress through written reports, including the semi-annual Monetary Policy Report to the Congress, prepared by the Board of Governors.
This article looks at the Federal Reserve Board of Governors, the main governing body of the Federal Reserve System. As a major player in the supervision and regulation of the US banking system, the Federal Reserve Board takes on several roles and responsibilities, which are explored in this article.
CIPP Exam Preparation
In preparation for the Certified Information Privacy Professional/United States (CIPP/US) exam, a privacy professional should be comfortable with topics related to this post, including:
- Banking regulator- Federal Reserve Board (I.A.d.v.1.)