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The Fed's Structure

Updated May 2021

The Federal Reserve Act of 1913 called for a central banking system with a central governing Board and a decentralized operating structure of multiple Reserve Banks. This hybrid structure is still in place today.

<p>1914 map of the Federal Reserve System and District borders, from the "Decision of the&nbsp;Reserve Bank Organization&nbsp;Committee"&nbsp;</p>

1914 map of the Federal Reserve System and District borders, from the "Decision of the Reserve Bank Organization Committee" 

 (Image is in the public domain)

by Ella Needler and Genevieve Podleski, Federal Reserve Bank of St. Louis

The Federal Reserve System has multiple parts that together serve as the central bank of the United States. This system has three main entities: the Board of Governors, the Reserve Banks, and the Federal Open Market Committee (FOMC).

The Fed's Structure Today

The Board

The Board of Governors is an independent government agency based in Washington, D.C.1 "Independent" means that it does not receive its funding through the congressional budget and appropriations process, and its leadership does not change when a new U.S. president takes office. This agency oversees the operations of the 12 Reserve Banks across the United States. The name "Board of Governors" is used for both this agency and the seven-member board that governs it.

The seven Board members, including the Chair (formerly known as the Chairman) and the Vice-Chair, are nominated by the President of the United States and confirmed by a vote of the Senate.2 The Board reports to and is accountable to Congress.3 Although Congress sets the goals for monetary policy, decisions made by the Board and specifically the Fed's monetary policy-setting body, the FOMC, do not require approval by the President or anyone else in the executive or legislative branches of government.4 The seven members of the Board of Governors oversee the Board Committees and sit on the FOMC.

The Banks

The 12 Reserve Banks are a network of decentralized, regional institutions of the Federal Reserve System that oversee economic and banking life across the United States. Each of the Federal Reserve Districts is headquartered in a Federal Reserve Bank: First (Boston), Second (New York), Third (Philadelphia), Fourth (Cleveland), Fifth (Richmond), Sixth (Atlanta), Seventh (Chicago), Eighth (St. Louis), Ninth (Minneapolis), Tenth (Kansas City), Eleventh (Dallas), and Twelfth (San Francisco). The Reserve Banks are independent corporations overseen by each respective Bank's Board of Directors.

The Federal Open Market Committee (FOMC)

The third entity, the FOMC, is the part of the Federal Reserve System that sets U.S. monetary policy. It is a committee made up of all seven Board members, the president of the Federal Reserve Bank of New York, and four of the other 11 Reserve Bank presidents, who serve as voting members on a yearly rotating basis.5 The Chair of the Board of Governors is the Chair of the FOMC. When journalists or others talk about "the Fed" setting monetary policy, they often mean the FOMC.


What other groups are part of the Federal Reserve System today?

Member Banks and Other Depository Institutions

In addition to the three main entities, member banks and other depository institutions are a part of the Federal Reserve System.6 All nationally chartered banks are required to be members of the system and state banks have the option to join as members if they meet certain requirements as stated in the Federal Reserve Act.7 Member banks are required to hold capital as stock at the Reserve Bank in their district because member banks are stockholders of their respective Reserve Bank.8 In addition, other depository institutions that provide financial services to Americans are subject to the regulations in place by the Federal Reserve System even if they are not member banks.9 Because of its services and regulatory processes with member banks and other depository institutions, the Federal Reserve is commonly referred to as "a bank for other banks."

Advisory councils

The Federal Reserve System and its three separate entities are advised by a number of different groups. The Board of Governors is advised by five groups: First, the Federal Advisory Council (FAC) was established by the Federal Reserve Act to oversee the Board, and is made up of representatives from each district who are elected by each Reserve Bank. Second, the Community Depository Institutions Advisory Council (CDIAC) was established by the Board of Governors in 2010 obtains information from thrift institutions and credit unions to inform the Board on lending conditions. The 12 members of the CDIAC are appointed from representatives of depository institutions who serve on advisory councils for their respective Reserve district. Third, the Model Validation Council was established by the Board of Governors in 2012 to provide expert and independent advice on the Federal Reserve's stress tests of banking institutions that are required under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Fourth, the Community Advisory Council (CAC) was established by the Board in 2015 to offer a diverse perspective on economic and financial life for the sake of consumers. Lastly, the Insurance Policy Advisory Committee (IPAC) was established in 2018 by the Board of Governors to provide advice and information to the Board on international insurance standards and insurance issues.

Consumer Financial Protection Bureau

The Bureau of Consumer Financial Protection (CFPB) is an independent bureau within the Federal Reserve System. Like the Fed, the CFPB is not part of the congressional budget and appropriations process, but gets its funding directly from the Federal Reserve. The CFPB was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Both the CFPB and the Fed are subject to the independent oversight of the Office of the Inspector General.

Historical Structure of the Fed

The Board of Governors and the Reserve Banks were established by the Federal Reserve Act in 1913. Following a financial crisis from the panic of 1907, many agreed the US needed a formal Central Bank. In a proposal to Congress, the structure of the Federal Reserve System was said to be "scientific in its method, and democratic in its control."10  The act was signed by President Woodrow Wilson in December of 1913. The act created the structure of the Board of Governors and the existence of the Reserve Banks, but did not outline the existence of the FOMC.

While the Federal Reserve Act outlined the existence of 8 to 12 Reserve Banks, it did not specify where the banks should be located. In early 1914, the Reserve Bank Organization Committee—made up of the Secretary of the Treasury, the Secretary of Agriculture, and the Comptroller of the currency— held hearings and conducted research to help them decide how many banks there should be and where they should be located. Thirty-seven cities applied to host one of the Reserve banks. In April 1914, they announced the 12 new Federal Reserve districts and the cities that would host each Federal Reserve Bank. The location of each bank was determined largely through survey results from national banks, as well as the location of economic life in the early 20th century.11  All 12 Reserve Banks opened in November of 1914.

After the Federal Reserve System proved its importance throughout World War I, the McFadden Act in 1927 solidified the existence and roles of the Reserve Banks. The law extended the Bank charters into perpetuity and revised commercial banking laws to support the competitiveness of the Reserve Banks.

Over the years, amendments to the Federal Reserve Act and other laws have changed the structure and functions of the Federal Reserve. The first significant change was the creation of the FOMC through the Banking Act of 1933, commonly known as Glass-Steagall. Following that, the Banking Act of 1935 gave voting rights to the Board members of the FOMC. Moreover, the Banking Act of 1935 redefined the Fed's relationship with the executive and legislative branches, as well as with the Treasury. These shifts led to a change in the terminology used to represent leaders of the Federal Reserve System. The Banking Act of 1935 took effect in 1936.

In 1955 following the Treasury-Fed Accord, Fed Chair William McChesney Martin shifted monetary policy decision making strictly to the FOMC by abolishing the Executive Committee.12 This further established the Federal Reserve System's as separate from the executive branch and set the tone for the Fed's modern state of independence.

Over the second half of the 20th century, there were a number of amendments to the Federal Reserve Act and laws passed through Congress that influenced the Federal Reserve System. Although these changes primarily impacted the functions of the Federal Reserve and did not cause substantial changes to the System's structure.

In the 21st century, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2010 following the 2008 financial crash with the subprime mortgage crisis and collapse of private institutions. Dodd-Frank created additional advising entities within the Federal Reserve System and gave the Fed more supervisory powers over banks. The act established the Financial Stability Oversight Council within the Treasury and the Consumer Finance Protection Bureau (CFPB).

Written by the Federal Reserve Bank of St. Louis, September 2021. See disclaimer.