Fed Functions: Supervising and Regulating Financial Institutions

[ Music ]>>Hi I’m Sebastian->>and I’m Helena. We work for the Federal Reserve, the central bank of
the United States. One of the 5 key functions
of the Federal Reserve is to supervise and regulate banks
and other financial institutions to ensure they operate safely. While we all rely on
these institutions for traditional services like
savings and checking accounts, credit cards and loans,
they also play an important and increasingly complex
role in the broader economy. That’s why the Fed along with other regulatory
agencies has the responsibility to supervise and
regulate these entities which include very small
community banks all the way up to some of the largest and most recognized
financial institutions in the nation and the world.>>The operations,
activities, and characteristics of financial institutions
have evolved and expanded tremendously
over the years and so has the Fed’s approach to
making sure they operate safely. The Fed monitors this
changing banking landscape through both a wide
and narrow lens. It monitors the financial
system as a whole for its broader impact
on the entire US economy, paying close attention
in particular to how financial institutions
interact with each other and even with public
institutions, including governments that
participate in our economy. And for more than a hundred
years, the Fed has supervised and regulated the operations
of individual institutions, making sure they are safe and
sound and are following the laws and regulations established
for them by both Congress and regulators like the Fed.>>The Fed sends examiners into
a bank it supervises to check that it’s operating
safely, for example, testing whether it has enough
capital to cover the risks from the loans it has made. And the Fed tailors its bank
exams depending on the size of the institution and taking into account the
impact they might have on the financial system
and economy as a whole. So the very largest global bank and the smallest community bank
are treated very differently. The largest banks have
received even greater attention since the financial
crisis from 2007 to 2009 when many large financial
institutions either failed or were on the brink of
failure, contributing to the global economic downturn
that affected all of us.>>When the Fed finds evidence that an institution hasn’t
followed laws or regulations, it requires a problem
to be fixed and may even issue a
penalty or if fed supervisors and analysts notice trends
and recurring activities across a financial
system, it may change or enact new regulations
to supervise programs that apply more broadly.>>In the end, all these
efforts help ensure that banks and the financial system
are helping the US economy and serving the public so that
our communities, households, and businesses remain
vibrant and growing. For more information on
this and other functions of the Federal Reserve,
visit federalreserve.gov and click on “About the Fed”.

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