Roles and Responsibilities of Reserve Bank Directors
The roles and responsibilities of Reserve Bank directors are unique from those of directors at any other organization. This uniqueness owes itself to the distinctive structure of the Federal Reserve System, as created by the Federal Reserve Act. The Federal Reserve System strikes a balance of public and private entities, as well as a balance of centralized and decentralized authority. The twelve Reserve Banks operate with a fair amount of independence, each serving the needs of its respective district, more so than would a single central bank with twelve branches. Each Reserve Bank brings a regional perspective on economic conditions to the conduct of monetary policy. Providing this regional perspective is a unique role and important contribution of Reserve Bank directors.
Another important contribution of Reserve Bank directors also relates to the Federal Reserve System’s balance of public and private entities. While the Board of Governors in Washington D.C. is a public institution, the Reserve Banks are private corporations authorized by federal statute. Reserve Bank directors provide administrative oversight similar to that provided by directors of any commercial bank or other private corporation. The directors carry out these corporate governance duties by serving on one or more committees, reviewing and approving the Bank’s annual budget, reviewing Bank performance, and overseeing the internal audit program and control environment.
One of the major responsibilities of the Federal Reserve System is to conduct the nation’s monetary policy to achieve three statutory policy objectives: maximum employment, price stability, and moderate long-term interest rates. Monitoring current economic conditions is essential to the conduct of monetary policy and the nine Federal Reserve Bank of Minneapolis directors, along with the five directors at its branch office in Helena, Montana, play an integral role in this.
The board meets on site several times a year for its regular meetings, at which directors report on current economic conditions in their industries and regions. In addition to attending these meetings, Bank directors spend a significant amount of time conferring with industry and regional contacts to provide the Bank insight on current and emerging issues that cannot readily be found in data, but which comes only from direct involvement with their local communities, businesses, and organizations. The directors’ viewpoints are highly valued. Their observations about the state of the district’s economy and credit conditions based on their experience are provided to Bank management and, ultimately, to the Board of Governors and the Federal Open Market Committee (FOMC).