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Federal Reserve System structure

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The USA FRS structures consists of:

  • Board of Governors;
  • Federal Reserve Banks;
  • FRS Member Banks;
  • Federal Open Market Committee

Board of Governors (Directors)

Seven members of the Board of Governors are appointed by the President of the United States (and approved by the Senate) for a term of fourteen years. To prevent one US President from appointing too many members to the Board, their terms end one after another. The Chairman is elected for four years.

The Board supervises and regulates the operations of the Federal Reserve Banks, authorizes funds for Federal Reserve Banks and appoints its presidents and vice-presidents.

Federal Reserve Banks (FRB)

The US FRS consists of 12 Federal Reserve Banks, which have subsidiaries in 25 cities.

Each Reserve Bank has its own Board, composed of nine directors who are not employees of the bank. Member banks of the Federal Reserve System of the United States elect class A and B directors, the FRS Board of Governors elects directors of class C. Three class A directors represent the interests of banks, the rest ? those of local industry, consumers, non-profit organizations.

Each Reserve Bank director exercises control over the operation of his bank (with ultimate control exercised by the Board of Governors).

FRBs derive income mainly from deposits in securities and currency as well as interest on deposits of loan institutions. These revenues are used to cover FRS costs. Annual financial statements of banks are checked by a public auditor and profits deposited in the Treasury.

FRS Member Banks

Each Reserve Bank is a joint stock company whose shares are owned by member banks of the district. Acquisition of shares is mandatory, and the amount of investment is defined by law: 3% of the capital. These shares may not be sold or pawned. Each member bank receives a 6% dividend, and a voice in the election of Class A and B FRB directors.

The FRS Member Bank status gives the right to borrow in the Federal Reserve banks, use their services and information.