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Supervision and Regulation

The Federal Reserve promotes the safety and soundness of financial institutions like banks and monitors their impact on the financial system as a whole.

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 (image Alex Hubenov/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 regulates and supervises financial institutions (such as banks) to ensure that they operate safely. When Congress passes a law that impacts the financial industry, the Fed creates regulations to implement that law.

Regulation is the work of establishing the rules that financial institutions must follow—in other words, issuing specific rules and guidelines governing the formation, operations, activities, and acquisitions of financial institutions.

Once the rules and regulations are set, supervision—monitoring and examining financial institutions—looks at whether an institution follows those rules and regulations, and that it operates in a safe and sound manner.

The Fed works alongside other government agencies that also regulate and supervise certain kinds of financial institutions, including the Office of the Comptroller of the Currency (part of the Treasury Department) and the Federal Deposit Insurance Corporation.

The position of Federal Reserve Vice Chair for Supervision and Regulation was created in 2010 as part of the Dodd-Frank Act.

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