Financial Regulation and Supervision

The Fed’s goals with respect to supervision and regulation include promoting the safety and soundness of the banking system, fostering stability in financial markets, ensuring compliance with applicable laws and regulations, and encouraging banking institutions to responsibly meet the financial needs of their communities.

The Fed supervises and regulates financial holding companies, bank holding companies, and member state banks. Banking Supervision and Regulation also supervises overseas and international operations owned by regulated financial institutions (including the activities of Edge and Agreement corporations) along with U.S. branches, agencies, and nonbank operations of foreign banks located in the United States. The Fed works closely with other federal and state authorities to meet the stated goals.

The Fed’s bank supervision and regulation includes analyzing and processing applications, on-site examinations/inspections and off-site financial monitoring, the use of enforcement actions (when warranted), and tracking macro banking conditions and identifying areas of emerging risk.

Examinations and Inspections

Safety and Soundness Supervision. Examiners conduct commercial bank examinations and bank holding company inspections to evaluate the soundness of the institution's assets and the effectiveness of its internal operations, policies and management. Examiners analyze asset quality, capital, earnings and liquidity and assess the institution's sensitivity to certain risks. They also check for compliance with banking laws and regulations.

Examiners routinely review and analyze off-site monitoring reports to track the overall condition of institutions and identify those that fail to meet financial criteria. Those that fail are scheduled for additional off- or on-site review.

Consumer Affairs Supervision. Consumer Affairs examiners evaluate a bank's compliance with consumer protection laws and regulations. They conduct reviews under the Community Reinvestment Act to determine how well the bank meets the credit needs of its community (in particular, the credit needs of low- and moderate-income individuals). Research staff provides educational outreach to institutions and consumers to ensure that consumers receive comprehensive information and fair treatment. Reserve Banks maintain a complaint hotline to handle issues raised by bank customers.

Specialty Supervision (Information Technology and Fiduciary examinations). Information Technology examiners evaluate the quality and reliability of a financial institution's computer systems and networks. Information technology examiners also conduct reviews of application software shared by the financial services industry.

Fiduciary examiners review the trust operations and asset management activities of financial institutions to ensure their activities are conducted in a prudent manner and comply with applicable laws, regulations and fiduciary standards.

Target Exams. Target exams may be performed on any bank, bank holding company, or financial holding company. Target exams review specific areas of companies.Targeted reviews are generally performed on the larger, more complex banking organizations as part of the continuous supervision process to focus more effectively on a company’s principal risks and internal systems for managing those risks.

Enforcement Actions. Enforcement actions are necessary for violations of laws, rules, or regulations, unsafe or unsound practices, breaches of fiduciary duty, and violations of final orders. Actions can be assessed against any entity the Federal Reserve has authority to supervise, including officers, directors, and employees. Formal enforcement actions include written agreements, cease and desist orders, removal and prohibition orders, and orders assessing civil money penalties.

Banking Studies. Each Reserve Bank tracks macro banking and economic trends and conditions in its region. This supports the supervisory process through the preparation of banking/economic studies and by development of new monitoring tools. Specific emphasis is given to areas of emerging risk and banking policy issues to determine the potential impact on supervised institutions.