Federal Reserve Banks (2024)

1. Home
2. About the Fed
3. Structure of the Federal Reserve System

Pursuant to the Federal Reserve Act, each of the 12 Reserve Banks is separately incorporated and has a nine-member board of directors.

Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank and elect six of the Reserve Bank's directors; three remaining directors are appointed by the Board of Governors. Most Reserve Banks have at least one Branch, and each Branch has its own board of directors. Branch directors are appointed by either the Reserve Bank or the Board of Governors.

Directors serve as a link between the Federal Reserve and the private sector. As a group, directors bring to their duties a wide variety of experiences in the private sector, which gives them invaluable insight into the economic conditions of their respective Federal Reserve Districts. Reserve Bank head-office and Branch directors contribute to the System's overall understanding of the economy.

The Federal Reserve is not funded by congressional appropriations. Its operations are financed primarily from the interest earned on the securities it owns--securities acquired in the course of the Federal Reserve's open market operations. The fees received for priced services provided to depository institutions, such as check clearing, funds transfers, and automated clearinghouse operations, are another source of income; this income is used to cover the cost of those services. After payment of expenses and transfers to surplus (limited to an aggregate of $10 billion), all the net earnings of the Federal Reserve Banks are transferred to the U.S. Treasury.

Federal Reserve net earnings are paid to the U.S. Treasury

The Federal Reserve transfers its net earnings to the U.S. Treasury.

Despite the need for coordination and consistency throughout the Federal Reserve System, geographic distinctions remain important. Effective monetary policymaking requires knowledge and input about regional differences. For example, two directors from the same industry may have different opinions regarding the strength or weakness of that sector depending on their regional perspectives. The decentralized structure of the System and its blend of private and public characteristics, envisioned by the System's creators, therefore, remain important features today.

Structure and Function

The 12 Federal Reserve Banks and their 24 Branches are the operating arms of the Federal Reserve System. Each Reserve Bank operates within its own particular geographic area, or district, of the United States.

Each Reserve Bank gathers data and other information about the businesses and the needs of local communities in its region. That information is then factored into monetary policy decisions by the FOMC and other decisions made by the Board of Governors.

Reserve Bank Leadership

As set forth in the Federal Reserve Act, each Reserve Bank is subject to "the supervision and control of a board of directors." Much like the boards of directors of private corporations, Reserve Bank boards are responsible for overseeing their Bank's administration and governance, reviewing the Bank's budget and overall performance, overseeing the Bank's audit process, and developing broad strategic goals and directions. However, unlike private corporations, Reserve Banks are not operated in the interest of shareholders, but rather in the public interest.

Each year, the Board of Governors designates one chair and one deputy chair for each Reserve Bank from among its Class C directors. The Federal Reserve Act requires that the chair of a Reserve Bank's board be a person of "tested banking experience," a term which has been interpreted as requiring familiarity with banking or financial services.

Each Reserve Bank board delegates responsibility for day-to-day operations to the president of that Reserve Bank and his or her staff. Reserve Bank presidents act as chief executive officers of their respective Banks and also serve, in rotation, as voting members of the FOMC. Presidents are nominated by a Bank's Class B and C directors and approved by the Board of Governors for five-year terms.

Reserve Bank Branches also have boards of directors. Pursuant to policy established by the Board of Governors, Branch boards must have either five or seven members. All Branch directors are appointed: the majority of directors on a Branch board are appointed by the board of directors of the Reserve Bank, and the remaining directors on the board are appointed by the Board of Governors. Each Branch board selects a chair from among those directors appointed by the Board of Governors. Unlike Reserve Bank directors, Branch directors are not divided into different classes. However, Branch directors must meet different eligibility requirements, depending on whether they are appointed by the Reserve Bank or the Board of Governors.

Reserve Bank and Branch directors are elected or appointed for staggered three-year terms. When a director does not serve a full term, his or her successor is elected or appointed to serve the unexpired portion of that term.

Reserve Bank Responsibilities

The Reserve Banks carry out Federal Reserve core functions by

1. supervising and examining state member banks (state-chartered banks that have chosen to become members of the Federal Reserve System), bank and thrift holding companies, and nonbank financial institutions that have been designated as systemically important under authority delegated to them by the Board;
2. lending to depository institutions to ensure liquidity in the financial system;
3. providing key financial services that undergird the nation's payment system, including distributing the nation's currency and coin to depository institutions, clearing checks, operating the FedWire and automated clearinghouse (ACH) systems, and serving as a bank for the U.S. Treasury; and
4. examining certain financial institutions to ensure and enforce compliance with federal consumer protection and fair lending laws, while also promoting local community development.

In its role providing key financial services, each Reserve Bank acts, essentially, as a financial institution for the banks, thrifts, and credit unions in its District--that is, each Reserve Bank acts as a "bank for banks." In that capacity, it offers (and charges for) services to these depository institutions similar to those that ordinary banks provide their individual and business customers: the equivalent of checking accounts; loans; coin and currency; safekeeping services; and payment services (such as the processing of checks and the making of recurring and nonrecurring small- and large-dollar payments) that help banks, and ultimately their customers, buy and sell goods, services, and securities.

In addition, through their leaders and their connections to, and interactions with, members of their local communities, Federal Reserve Banks provide the Federal Reserve System with a wealth of information on conditions in virtually every part of the nation--information that is vital to formulating a national monetary policy that will help to maintain the health of the economy and the stability of the nation's financial system.

Certain information gathered by the Reserve Banks from Reserve Bank directors and other sources is also shared with the public prior to each FOMC meeting in a report commonly known as the Beige Book. In addition, every two weeks, the board of each Reserve Bank recommends discount rates (interest rates to be charged for loans to depository institutions made through that Bank's discount window); these interest rate recommendations are subject to review and determination by the Board of Governors.

Federal Reserve Administrative Manual - Employee Conduct (PDF)