ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Introduction. The Fed has supervisory and regulatory authority over many banking institutions. In this role the Fed 1) promotes the safety and soundness of the banking system; 2) fosters stability in financial markets; and 3) ensures compliance with laws and regulations under its jurisdiction.

Detailed explanation-2: -Institution Supervision The Federal Reserve is responsible for supervising–monitoring, inspecting, and examining–certain financial institutions to ensure that they comply with rules and regulations, and that they operate in a safe and sound manner.

Detailed explanation-3: -Bank holding companies constitute the largest segment of institutions supervised by the Federal Reserve, but the Federal Reserve also supervises state member banks, savings and loan holding companies, foreign banks operating in the United States, and other entities.

Detailed explanation-4: -The Federal Reserve’s supervision activities include examinations and inspections to ensure that financial institutions operate in a safe and sound manner and comply with laws and regulations. These include an assessment of a financial institution’s risk-management systems, financial conditions, and compliance.

Detailed explanation-5: -The Federal Reserve regulates state-chartered member banks, bank holding companies, foreign branches of U.S. national and state member banks, Edge Act Corporations, and state-chartered U.S. branches and agencies of foreign banks.