Banking and Financial Services, Payments

Banking and Financial Services

What financial institutions are members of the Federal Reserve System? What does membership entail?
Banks chartered by the federal government are national banks and Fed members. State-chartered banks are either members (state member banks) or nonmembers (state nonmember banks). State banks are not required to have Fed membership.

Member banks hold stock in their regional Reserve Bank in an amount equal to 6 percent of their capital and surplus. They earn a 6 percent dividend annually on their stock, and vote for the Class A and Class B directors of the Reserve Bank. Stock is only available to member banks.

What is the Federal Deposit Insurance Corporation (FDIC)? What does it mean if a bank is an FDIC member?
The Federal Deposit Insurance Corporation is an independent agency that regulates state-chartered banks without Fed membership. The FDIC also insures the deposits of member banks up to $250,000 per account. Almost all U.S. banks and savings associations are FDIC members. 

How many commercial banks exist in the United States?
The Federal Deposit Insurance Corporation collects and stores data on commercial banks.

How do I know if a bank is safe and sound?
Regulators do not publicize ratings for banks’ thrift safety and soundness.

How does the Fed maintain the stability of the financial system? 
The Fed maintains financial stability through: 

• Its use of monetary policy tools that promote price stability and foster healthy financial institutions and markets;
• The supervision and regulation of banking and financial institutions; and
• Oversight of the payment system. 

What is the discount window? 
The discount window is the Fed’s lending facility to depository institutions. It helps relieve liquidity strains by providing a reliable backup source of funding.

What is the discount rate? 
The discount rate is the interest rate the Fed charges depository institutions to borrow funds for a short period (the primary credit rate, the secondary credit rate and the seasonal credit rate). Although Reserve Bank board of directors establish the discount rate independently every 14 days, the Board of Governors approves the rate. The Fed maintains a uniform structure of discount rates across all Reserve Banks.

What is the role of primary dealers?
Primary dealers are banks and securities broker-dealers that trade in U.S. government securities with the New York Fed. The New York Fed’s Open Market Desk makes these trades to implement monetary policy. The purchase of government securities in the secondary market adds reserves to the banking system, while the sale of securities drains reserves.

What is the Community Reinvestment Act of 1977? What is a CRA rating?
The CRA Act requires federal banking regulators to ensure that banks meet the credit needs of their local communities, including low- and moderate-income neighborhoods. The Federal Financial Institutions Examination Council lists the regulator’s CRA ratings.

How Do I

Find information on banks or bank holding companies mergers and acquisitions?
Visit the Board of Governors’ Application Filing Information.

Locate the Annual Report of Bank Holding Companies (FR-Y6 form)?
Visit Reporting Forms.

Get a list of banks that operate or provide services in my area?
Use the National Information Center's Institution Search tool.

Research a bank that seems to have closed?
Use the Fed’s Institution Search tool.

Payments

What is the Fed’s role in U.S. Payments Services?
Congress created the Fed in 1913 to reduce the impact of banking crises on the payment system. The Fed transfers more than $4 trillion each day through financial institutions, which have accounts with one or more of the 12 Reserve Banks. As part of its role in the payments system, the Fed:

• Offers funds transfer and settlement services like Fedwire, which is used to make large-value, time-critical payments. 
• Is one of only two national Automated Clearing House operators.
• Meets cash demand by issuing and processing currency, and distributing and storing coin.
• Processes paper and electronic checks.
• Maintains the Treasury’s bank accounts and provides support services.
• Processes money orders on behalf of the U.S. Postal Service.
• Offers payment services to other federal agencies and foreign governments.

What is an Automated Clearing House?
A system for processing batches of electronic funds transfers for pre-authorized, reoccurring payments — payroll, corporate payments to vendors, insurance premium payments and utility payments.

Is FedNow replacing cash? Is it a central bank digital currency?
No. FedNow is not related to a digital currency. FedNow is a payments service the Federal Reserve is making available for banks and credit unions to transfer funds. It is like other Federal Reserve payments services, such as Fedwire and FedACH. The FedNow Service is neither a form of currency nor a step toward eliminating any form of payment, including cash.

The FedNow Service is an instant payments service provided by the Federal Reserve, launching in July 2023. FedNow will be available to depository institutions, such as banks and credit unions, in the United States and will enable individuals and businesses to send instant payments through their depository institution accounts. Instant payments allow individuals and businesses to send and receive payments within seconds at any time of the day, on any day of the year, so that the receiver of a payment can use the funds almost instantly.

The Federal Reserve has made no decision on issuing a central bank digital currency (CBDC) and would only proceed with the issuance of a CBDC with an authorizing law. Testifying before the House Financial Services Committee in March 2023, Chair Powell said a central bank digital currency is, “something we would certainly need Congressional approval for.”

Learn more by viewing these FedNow FAQs and CBDC FAQs.