Federal Reserve System (FRS)

Federal Reserve System (FRS) popularly known as "The FED", is the central bank of the United States and is regarded as one of the most prominent financial institutions in the world. FRS was incorporated in order to provide the US with a flexible stable and safe financial and monetary system.

Most importantly, there are 12 regional Federal Reserve Banks, who are responsible for their respective geographic locations.

Main Functions of the “FED”

• Supervision and regulation of banks

• Conducting the national monetary policy

• Providing requisite banking Services

In simple terms, the Fed is empowered to take appropriate measures to ensure financial stability in the country. The Fed is the regulator of all the banking and financial institutions and it is considered as the lender of last resort for these financial institutions.

The decisions and actions taken by the Fed are not verified by the President or any government officer which is why it is considered as an independent body.

Duties of the Fed:

1. Implementation of the national monetary policy wherein the credit conditions are influenced in order to ensure stable prices, employment and moderate long-term interests in the US economy.

2. Regulation and supervision of the banking/financial institutions in order to ensure that there is utmost safety in the US banking system and protection of credit rights of the consumers.

3. Maintenance of stability in the financial system of the United States by taking systematic risks, and

4. Providing essential financial services in the form of operating the national payments, foreign official institutions, depository institutions and the US government

The main income of the Fed is generated from the interest on governmental securities, the interest of foreign currency investments, fees for services, loan facility to depository institutions. After paying all the required expenses, the Fed transfers the leftover earnings to the U.S Treasury.

 

 

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