Federal Reserve System; Structure and Functions

T he structure encompasses: Regional Reserve banks, and The Board of Governors, that serves as the agent of a federal government. This is based in Washington, D.C. The Federal Reserve commonly referred to as the ‘Fed’ was founded in 1913 by congress to offer the nation with more stable, more flexible and a safer financial and monetary system. Its function in banking and economy at large has been expanding over the years. The Fed plays three elementary functions: Supervision of banking, Formulation and implementation of monetary policy, Financial services. System leadership; The leadership for the Federal is provided by the Board of Governors, with its location in Washington, D.C. Also called the Federal Reserve Board, the Board of Governors is in actual sense the national figure of the Fed. There are seven governors in the board, whose appointment is done by the president and then approved by the Senate. The Governors’ term is 14 years, which is sufficient enough for ensuring continuity and stability over time. The appointment of the chairperson and the assistance is limited to a four-year term, subject to reappointment depending with term limitations. The key functions of the Board of Governors are: Guidance of monetary policy action. Leading committees involved in the study of contemporary issues such as e-commerce and banking laws touching on consumers. Analyzing domestic, regional and international financial and economic conditions. In depth supervision of financial services industry. It does this with an aim of administering regulations that protect consumers. It also oversees the payments system of the nation. It monitors the activities and transactions of Reserve Banks, including approving appointments of their heads. Setting reserve requirements for deposit taking institutions. Together with the Reserve Banks, the Board sets discount rate policy. The board members are also members of the Federal Open Market Committee-FOMC. This is the team that makes the crucial decisions regarding the cost and availability of credit and money in the economy. Consisting of 12, members- 7 from the Board of Governors and the other five are presidents of various Reserve Banks.   [photo: www.flickr.com]