Supervision and Regulation

 

The Federal Reserve has supervisory and regulatory authority over a wide range of financial institutions and activities. It works with other federal and state supervisory authorities to ensure the safety and soundness of financial institutions, stability in the financial markets, and fair and equitable treatment of consumers in their financial transactions. As the U.S. central bank, the Federal Reserve also has extensive and well established relationships with the central banks and financial supervisors of other countries, which enables it to coordinate its actions with those of other countries when managing international financial crises and supervising institutions with a substantial international presence.

The Federal Reserve has responsibility for supervising and regulating the following segments of the banking industry to ensure safe and sound banking practices and compliance with banking laws:

  1. Bank holding companies, including diversified financial holding companies formed under the Gramm-Leach-Bliley Act of 1999 and foreign banks with U.S. operations.
  2. State chartered banks that are members of the Federal Reserve System
  3. Foreign branches of member banks.
  4. Edge and agreement corporations, through which U.S. banking organizations may conduct international banking activities.
  5. U.S. state licensed branches, agencies, and representative offices of foreign banks.
  6. Nonbanking activities of foreign banks

Although the terms bank supervision and bank regulation are often used interchangeably, they actually refer to distinct, but complementary, activities. Bank supervision involves the monitoring, inspecting, and examining of banking organizations to assess their condition and their compliance with relevant laws and regulations. When a banking organization within the Federal Reserve’s supervisory jurisdiction is found to be noncompliant or to have other problems, the Federal Reserve may use its supervisory authority to take formal or informal action to have the organization correct the problems.

Bank regulation entails issuing specific regulations and guidelines governing the operations, activities, and acquisitions of banking organizations.

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