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Promoting Financial System Stability

The Federal Reserve monitors financial system risks and engages at home and abroad to help ensure the system supports a healthy economy for U.S. households, communities, and businesses.

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 (Anton Prado PHOTO / Shutterstock)

adapted by Federal Reserve Bank of St. Louis staff from content in the Board of Governors's overview The Fed Explained

The Federal Reserve was designed to help prevent or lessen the impact of financial crises like the Panic of 1907. Since the Fed was established in 1913, that role in promoting financial stability has changed as the U.S. and global financial systems have changed. Financial stability depends on firms and critical financial market structures having the financial strength and operational skills to manage through volatility and continue to provide their essential products and services to consumers, communities, and other businesses.

The 2007–09 "Great Recession" revealed shortcomings in the financial system's infrastructure and in the framework for supervising and regulating it. With the 2010 Dodd-Frank Act, Congress assigned the Federal Reserve new responsibilities in the effort to promote financial system stability and keep pace with changing dynamics and innovation in the broader economy

The Fed's work to promote financial system stability looks at connections and risks across and between financial institutions, not just the safety and soundness of individual financial institutions (which is part of the Fed's supervision and regulation work).

Learn more at the links below: