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CSBS Highlights Fed Board’s Evolving Composition, Supervisory Role

 

Oct 25 - The Conference of State Bank Supervisors has released a new white paper titled “The Composition of the Federal Reserve Board.” The white paper outlines the 100-year history of the Federal Reserve Board while highlighting two key trends: Congress’s continuing efforts to ensure the composition of the board is representative of the country’s economic diversity and the board’s expanding supervisory role. CSBS has also released an infographic illustrating the composition of the members of the Board of Governors, in terms of background and experience, over its 100-year history.

In the paper, CSBS draws attention to the presence of diversity as a hallmark of the board’s composition since its inception. The paper discusses the legislative history of the Federal Reserve Act, which created the central bank, and subsequent changes in law that have focused on the importance of including diverse perspectives on the board. 

A historical look at the Fed’s supervisory role over the years also shows a clear expansion and heightened emphasis on the central bank’s supervisory authority. This was most recently demonstrated by the Dodd-Frank Act where Congress not only affirmed the Federal Reserve’s role as a bank supervisor, but also created the new Board role of Vice Chairman of Supervision, a clear directive from Congress to focus on issues of bank supervision. 

These two actions — enhancing the Federal Reserve’s supervisory authority and the continuing emphasis on the Federal Reserve’s governance — illustrate the importance of maintaining a tight connection between the Board of Governors and supervision. This can only be accomplished by naming individuals to the Board of Governors with an in-depth understanding of bank supervision.

“The Federal Reserve’s significant role in the oversight of financial institutions improves its ability to identify and address emerging threats to the U.S. financial system,” CSBS President and CEO John W. Ryan said.

“When Congress debated this issue during Dodd-Frank, Congress saw the key connections between bank supervision and the Federal Reserve’s financial stability and monetary policy functions,” Ryan said. “CSBS supported this view and advocated strongly for preserving the Federal Reserve’s role as a bank supervisor. But to effectively achieve these objectives, the board must include people who know and understand supervision: individuals who have effectively supervised and regulated depository institutions.”

The infographic is available at http://goo.gl/eCKVrS.

The CSBS white paper is available at http://goo.gl/6ArZSr

 

 


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