All about the Federal Reserve banks

The Federal Reserve is a national system of banks underpinning the United States' financial system based on twelve districts. It is responsible for supervising banking activities in the United States, the activities of American banks abroad and for setting national reserve capacity. Its responsibilities include supervising credit, contributing to monetary policy and administering the national system of payments. Read more to learn about Federal Reserve banks.

The structure of the system

Structure For the purposes of the US, Federal Reserve America is divided into twelve districts, each having a federal reserve bank set in a major city. There are other privately owned banks within the system. It is controlled by the board of governors of the federal reserve system, whose seven members serve a fourteen year term. The chair and vice chair serve a four year term. Members are only allowed one term. The board members are assisted by the presidents of each of the twelve reserve banks. Governance Members are appointed by the president. The law requires the president to appoint impartially with due regard to the varying commercial, industrial, agricultural and financial interests in the country and to its geographical areas. All appointments are subject to confirmation by the senate. The board meets several times a week. Seven of its members serve on the Federal Open Market committee [FOMC] along with the presidents of each of the twelve reserve banks, only five of whom can vote at any one time.

Role

The federal reserve board sets reserve requirements to which every bank in the United States must adhere. This is to ensure that the nation's financial system does not collapse and that there is financial stability. It exercises a supervisory role, inspecting to ensure that banks are meeting these legal requirements. Its role in the FOMC is to supervise all open market activities in the United States and to contribute to monetary policy decisions, including the setting of interest rates. The fed, as it is known, oversees all banking activities in the United States. These include US and foreign banks and any companies that they own. It supervises the activities of foreign banks in the country and the activities of US banks abroad. It also has a role supervising the administration of credit, which includes the activities of credit companies and banks. It plays a key role in the administration of the national payment system, ensuring that payments to and from the government are efficiently made. The reserve is independent of the state in its operations and is not subject to direct presidential control, though it is subject to congressional supervision. The US government is the beneficiary of the bank's profits, which it receives yearly.