As a central monetary institution or bank of the United States, the Federal Bank has the entire nation’s responsibility on its head. The bank has to carry out certain functions that are impeccable to the financial system of the country. However, are you aware of which of the following is a primary responsibility of the Federal Reserve Bank? In this article, I will cover all the aspects of the roles and functions that this system is delegated to perform. 

What Is A Federal Reserve Bank?

Due to several financial pitfalls, in 1913, the Congress government of the United States established the Federal Reserve System. The bank failures had led to a severe decrease in credit availability. The Federal Reserve Bank or System, also known as the Fed, is a central banking institution of the United States of America. 

It had been created with the motive of maintaining a more flexible, safer, and stable financial and monetary system. After the Great Depression, under the Banking Act of 1935, the Fed was able to develop policies that could control the availability of credit and money. This system has completely changed as well as shaped the economy of the country. 

This organization does not entail any single bank system. Rather, it was built with the concept of a centralized banking system with two significant features: a combination of private and public characteristics as well as a decentralized structure. I am sure the question of ‘which of the following is a primary responsibility of the Federal Reserve Bank’ is still bothering you. Hence, to learn about it, follow through with the article. 

What Are The Sections Of The Federal System?

To understand which of the following is a primary responsibility of the Federal Reserve Bank, first, you need to understand the various divisions of the system. The policies initiated by the Fed have been organized in a series of events that are focused on elevating the hyperactive economic conditions or increase economic activities to trigger an economy that is inactive. The Federal System is basically composed of three bodies that are: 

#1 Federal Reserve Board

The Federal Reserve Board is the fundamental division of such as system. It is also known as the Board of Governors. The board is stationed in Washington DC. The members of the Reserve Board comprise of seven members. 

These members are usually nominated and appointed by the President. Consequently, they must acquire the confirmation of the Senate. These governors serve a term of fourteen years.  

#2 Federal Reserve Banks

A channel of twelve Federal Reserve Banks along with its twenty-four branches operate throughout the United States confined to their own geographic area. The primary aim of each of these banks is to collect information about the economic condition of various communities that comes under its jurisdictions. 

These pieces of information are vital. The banks also voice their recommendations that are taken into consideration while the decision-making process by the Board of governors and FOMC.

#3 Federal Open Market Committee

The Federal Open Market Committee, also regarded as FOMC, is a very significant division of the system. It is the monetary policymaking body that is responsible for developing policies driving to stimulate standard prices and stable economic growth

The committee is formed of the Board of Governors, the President of the New York Federal Reserve Bank, and the Presidents from four of the other eleven reserve banks. 

What Are The Roles And Responsibilities Of A Federal Reserve Bank?

I am sure now you are excited as we are approaching to answering your question of which of the following is a primary responsibility of the Federal Reserve Bank! First, let us have a look at the general functions that this Federal system is bound to perform:

  1. Helping to manage and regulate the financial system.
  2. Supervise the country’s monetary policy by influencing the credit situation in the economy in accordance with maximum employment, steady prices, and moderate long-term interest rates.
  3. Deliver financial services to depository institutions.
  4. Ensure the safety of the nation’s financial systems by conducting several banking institutions and activities. 
  5. Promoting fair lending, community development, and consumer protection.

Now, coming to the roles and responsibilities of the Federal Reserve Bank, I must tell you that the organization has three key factors to take care of. These are:

#1 Monetary Policy 

In terms of the monetary policy of the nation, the Federal system is guided by three principal aspects such as price stability, maximized employment, and moderate long-term interests. These are factors of national importance. 

The aims and goals of the Federal Reserve are driven towards and contribute to achieving these economic goals. The ability of the organization to influence monetary and credit availability and other financial situations is what supports it to achieve those objectives. 

#2 Banking Supervision

Banking Supervision

The Federal Reserve is also responsible for the regulation and supervision of every aspect of the financial system. Inspecting, examining, and monitoring several financial institutions such as state-chartered banks, bank holding companies, etc., to analyze their overall situation, keep them safe, and ensuring compliance with certain laws are some of the responsibilities of the Fed. 

The Board of governors has the power to even lay down rules within which the state member banks, bank holding companies, and other related institutions must operate.

#3 Financial Services

Financial Services

The Federal Reserve Bank has various functions to perform and certain aspects to maintain and regulate. Financial services are such an aspect that calls for the Bank to manage accounts for and provide specific payment and settlement services to the federal government and banking institutions. 

Frequently Asked Question

Here are a few frequently asked questions scouted from the internet and answered to spare you from further queries.

1. What Is An Example Of The Federal Reserve?

There are a few federal banks that have been recognized by the country. They are the Federal Reserve Bank Of New York and the Federal Reserve Bank of Boston. Other than these, here are some of the other cities with Federal Banks Philadelphia, San Francisco, Cleveland,  Minneapolis, Kansa, Dallas, etc.

2. Does The Federal Reserve Print Money? 

No, the Federal Reserve does not print money. However, they do have a say in determining the number of bills that are printed by the Treasury Department every year.

3. Who Profits From The Federal Reserve?

Well, no one has full ownership of the Federal Reserve Bank. It is all in all a non-profit entity that is there to provide financial service to the country on behalf of the government of the U.S

4. Where Does The Federal Reserve Get Its Money? 

These are the ways Federal Reserve gets money:

  • Purchase securities in the market by utilizing the new money.
  • Creating reserves in the bank to other commercial banks

Basically, they make money through investment in the open market, and then they are multiplied in fractional reserve banking.

Final Thoughts

I hope you could now make out the answer to your question about which of the following is a primary responsibility of the Federal Reserve Bank. If you are still struggling to understand, let me help you. 

The ability of the organization to maintain a stable financial system and influence the monetary policy in the nation is the most important and primary function of this body. Having good control over such aspects not only ameliorates the economy but also contributes to the betterment of society. 

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Jason Gibbs is a freelance content writer and enthusiastic blogger. He is the co-founder of Finance Team. He contributes to many authority blogs such as Sb News Room,Online Marketing Tools, Smart Business Daily, Emblem Wealth, RSL Online.

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