The Federal Reserve Bank of New York

Поволжский кооперативный институт

Российского университета кооперации

Кафедра: «Иностранных языков»

Реферат

На тему: «The Federal Reserve Bank of New York»

Выполнила: студентка II курса

Группы Фк-81

Орлова А.Н.

Проверила: Смирнова А.П.

Энгельс 2010

Contents

Introduction

I. Board of Governors of the Federal Reserve System

II. Foreign Exchange

III. Role of Central Banks

IV. Supervision and Regulation

V. Open market operations

VI. Securities Lending

VII. Check Processing at Federal Reserve Bank Regional Offices

Conclusion

Literature

Introduction

1) Board of Governors of the Federal Reserve System

The Board of Governors of the Federal Reserve System plays a major role in making U.S. monetary policy.

The President of the United States appoints the seven members of the Board for staggered 14-year terms.

The Board of Governors supervises the work o the Federal Reserve Banks and issues a variety of banking and consumer-credit regulations.

The Federal Reserve System, the central bank of the United States, conducts the nation's monetary policy, supervises and regulates banks, and provides a variety of financial services to the U.S. Government and to the nation's banks. The Board of Governors supervises the Federal Reserve System. Located in Washington, D.C., the Board is a federal Government agency consisting of seven members appointed by the President of the United States and confirmed by the U.S. Senate. The Board has a staff of about 1,900 employees.

Monetary Policy Responsibilities

Most importantly, the Board plays a key role in the decisions of the Federal Open Market Committee (FOMC). The members of the Board of Governors have a majority (7 out of 12) of the votes on the FOMC, the arm of the Fed that determines the nation's monetary policy. The five other votes belong to the president of the Federal Reserve Bank of New York Fed that conducts the open market operations to implement the FOMC's monetary policy - and four other Reserve Bank presidents, who serve one-year terms as voting members of the FOMC on a rotating basis. The Chairmen of the Board of Governors serves as Chairman of the FOMC.

The Board has other monetary policy responsibilities as well. The Monetary Control Act of 1980 gives the Board the authority to set a reserve requirement of from 8% to 14% on transaction deposits (that is, deposits in checking and other accounts from which transfers can be made to third parties) and of up to 9% on non-personal time deposits (that is, deposits not held by an individual or sole proprietorship). In June 2003, the reserve requirement was 10% on transaction deposits and 0% on time deposits.

The Board also approves the discount rate (the interest rate at which Federal Reserve Banks extend short term loans to depository instructions) that is recommended by the board of directors of each of the 12 Federal Reserve Banks. Because the credit market is national, the rate approved by the Board has, for decades, been the same for all of the Reserve Banks.

Other Responsibilities

The Board supervises the activities of the Reserve Banks, approves the Reserve Bank's annual budgets, appoints three of the nine directors of each Reserve Bank (the others are elected by the commercial banks in the Reserve bank's District that are members of the Federal Reserve System), and approves the candidate for Bank president recommended by the directors of each Reserve Bank. The Board of Governors also approves major Reserve Bank expenditures, such as those for the construction of buildings and the salaries of Reserve Bank presidents.

The Board of Governor plays a major role in banking supervision, which entails the examination of depository institutions for safety and soundness and for compliance with laws and regulations. The Board's supervisory responsibilities extend to all bank holding companies, state-chartered banks that are members of the Federal Reserve System, and Edge Act and agreement corporations through which U.S banks conduct operations abroad. In addition, the Board also oversees the activities of the U.S. branches of foreign banks. While the Board determines bank supervision policy, it delegates the task of conducting the examinations to the 12 Reserve Banks.

The Board also publishes a wealth of statistics and other information about the Federal Reserve and about the U.S. economy. For example, the data on industrial production, one of the country's major macroeconomic indicators, are published by the Board.

Appointments to the Board

By law, the President of the United States must make appointments to the Board that yield a “fair representation of the financial, agricultural, industrial, and commercial interests and geographical divisions of the country.” The country is divided into 12 Federal Reserve Districts, and no two Governors may come from the same District.

The Governors are appointed for 14years, and the terms are staggered, with one expiring on January 31of every even-numbered year. A Governors who has served a full 14-year term may not be reappointed, but someone who was appointed to complete ah unexpired term may be reappointed to a full 14-year term. Once appointed, Governors cannot be removed from office for their policy views. The length of the terms and the staggered appointments process are intended to contribute to the insulation of the Board-and the Federal Reserve System-from day-to-day political pressures to which it might otherwise be subject. If all Governors serve full terms, a U.S. President would be able to appoint only two Governors in a four-year presidential term and four-a majority of the Governors-during eight years in office. In reality, however, many Governors leave be for completing their 14-year terms, and recent Presidents have made more than one appointment to the Broad every two years.

As stipulated in a Banking Act f 1935, one of the seven Governors is appointed by the U.S. president to a four-year term as Chairman. This selection must be confirmed by the Senate. The Chairman serves as a public spokesperson and representative for a Broad, manager of the Broad's staff, and Chairman at Broad meetings. Reaffirming the apolitical nature of the Broad, recent Presidents of both major political parties have selected the same Board Chairman. Alan Greenspan was initially appointed Chairman by Roland Reagan, a Republican, and later was reappointed by Republican George H.W. Bush. Chairman Greenspan predecessor, Paul Volcker, was first appointed by Jimmy Carter, a Democrat, and then reappointed by Roland Reagan.

History

The Board did not always enjoy the political independence that it has today. The first Federal Reserve Board, created by in Congress in 1914, consisted on five members. The Secretary of the Treasury and the Comptroller of the Currency had automatic memberships, and the President was responsible for appointing the remaining three members, subject to the approval of the Senate. Two of the five members were designated Governor and Vice Governor, the chief administrative officers of the Board. The role of Chairman at Board meetings was assigned to the Secretary of the Treasury.

One of the Board's earliest conflicts concerned the strong representation of the Treasure Department on the Broad. Some Broad members were concerned that the presence of Secretary of the Treasury William McAdoo and Comptroller of the Currency John S. Williams, the two ex-officio officers on the Federal Reserve Board, created an inadvisable link to the Administration. In addition, several Board members complained that Board meetings were held at the Treasury Department headquarters in Washington. They were concerned that this close relationship to the Treasury might create a conflict of interest and lead to undue political influence in the setting of monetary policy. These Board members suggested that the Federal Reserve Broad meet outside Washington in order to discourage the Secretary of the Treasure and Comptroller from attending. Their proposal was never put into practice, however, because Congress passed the Banking Act of 1935, which eliminated the requirement for the Secretary of the Treasury and the Comptroller to serve on the Broad. The Act also renamed the Federal Reserve Board as the Broad of Governors, the title of Governor as Chairman, and the title of Vice Governor as Vice Chairman, an increased the number of Board members to its current level of even. In 1937, the Board of Governors moved out of the Treasury building and into its own headquarters in Washington.

2) Foreign Exchange

The Federal Reserve Bank of New York carries out foreign exchange-related activities of behalf of the Federal Reserve system and the U.S. Treasury. In this capacity, the Bank monitors and analyzes global financial market developments, manages in U.S. foreign currency reserves, and from time to time intervenes in the foreign exchange market. The Bank also executes foreign exchange transactions on behalf of customers.

Role of Central Banks

Despite the size and importance of the foreign exchange market, it remains largely unregulated. There is no international organization that supervises it, nor any institution that sets rules. However, since the advent of the flexible exchange rate system in 1973, governments and central banks, such as the Federal Reserve System in the United States, occasionally intervene to maintain stability in the FX market.

There is no standard definition of instability or a disorderly market-circumstance must be evaluated on a case-by-case basis. Sharp rapid fluctuations of exchange rates and traders' reluctance to be ready to either buy or sell currencies (maintaining a “two-way” market) may be sings of disorderly market.

To restore stability, the central banks often work together. However, a country taking a conservative view on intervention would act only response to unusual circumstances that require immediate action, like political unrest or natural disasters. Most monetary authorities would be less likely to intervene to counteract the fundamental forces that drive FX markets, such as trade patterns, interest rate differentials and capitals flows.

Intervention

The U.S. Treasury has the overall responsibility for managing the U.S. government's foreign currency holdings. It works closely with the Federal Reserve to regulate the dollar's position in the FX markets. If the Treasure feels that there is a need to weaken or strengthen the dollar. It instructs the Federal Reserve Bank of New York to intervene in the FX market as Treasure's agent. The Federal Reserve uses the Exchange Stabilization Fund (ESF) to finance this interventions.

The Federal Reserve Bank of New York buys dollars and sells foreign currency to support the value of the dollar. The Fed also sells dollars and buys foreign currency to try and exert downward pressure on the price of the dollar.

The transactions in the intervention are small compared to the total volume of trading in the FX market and these actions do not shift the balance of supply and demand immediately. Instead, intervention is used as a device to signal a desired exchange rate movement and affect the behavior of investors in the FX market.

The frequency of intervention of the FX markets by the U.S. monetary authorities has reduced tremendously over the last decade. The Federal Reserve Bank of New York intervened only twice since 1995.

Central banks in other countries have similar concerns about their currencies and sometimes intervene in the FX markets as well. Usually, interventions operations are undertaken in coordination with other central banks.

Most of the Federal Reserve Bank of New York activities in the foreign exchange market are for far less dramatic purposes than to influence exchange rates. The New York Fed often intervenes in the FX market as an agent for other central banks and international organizations to execute transactions related to flows of international capital.

Some countries have special arrangements with other countries to help them keep their currencies stable.. Many less developed countries have their soft currencies pegged to hard currencies, so their value rises and falls simultaneously with the stronger currency. Some peg, or target, their currency to a basket of hard currencies, the average of a group of selected currencies.

Countries that are part of the European Union (EU) had pegged their currencies to the euro. There were formulas set for converting from the euro to the currency of each member nation. However, since January 2002, all currencies that were part of the Economic and Monetary System of the EU ceased to exist.

Intervention in the FX market is not the only way monetary authorities can affect the value of their countries' currencies. Central banks can also affect foreign exchange rates indirectly by influencing interest rates.

Concerns about Eurocurrency

An important side effect of the increase of international economic activity over the past few decades has been the creation and growth of the Eurocurrency market. This is the name given to any bank deposits in any country held in a different country's currency, like U.S. dollars in a British bank. A great deal of foreign exchange market activity involves the transfer of Eurocurrency deposits.

Eurocurrency, especially Eurodollars (approximately two-thirds of Eurocurrency are U.S. dollars) are a source of concern to central banks and regulators because they are “stateless money”-subject to very little regulation. Rules governing currency and bank deposits-such as taxes, restrictions on capital movements and exchange controls-do not apply to the currency in the Eurocurrency markets.

Banks around the world use the Eurocurrency market to move and store funds more profitably than they could in many countries. This poses a problem for countries attempting to regulate capital flows.

International trade and foreign exchange cannot be viewed as two separate economic processes. The two are intimately connected on many levels. Increased trade and investment has brought the FX markets to their present level. Together, trade and foreign exchange affect peoples' living standards and livelihoods all over the world.

Supervision and Regulation

As part of our core mission, we supervise and regulate financial institution in the Second District. Our primary objective is to maintain a safe and competitive U.S. and global banking system.

Bank supervision

The Bank Supervision Group supervises and regulates financial institutions in the Second District. Its primary objective is to maintain safe and competitive U.S. and global banking systems. Staff in the Group assesses the safety and soundness of domestic banking institution and operations of foreign banking organizations in the District through periodic onsite evaluations and offsite financial analysis and surveillance. The Group also evaluates firms' proposals to acquire or establish additional operations, and analyzes issues and developments to identify emerging supervisory risks and develop domestic and international supervisory policy.

Financial sector Policy and Analysis

Provides technical expertise and analytical support to managers and stuff in the Bank Supervision Group and elsewhere in the bank on issues related to capital markets, risk management, banking reform, accounting, capital adequacy, electronic banking and payments policy.

Assists senior management it the development of both Federal Reserve System and international supervisory policy.

Analyzes and evaluates proposals by domestic and foreign banking institutions to undertake mergers and acquisitions, make foreign investments, and establish non-banking subsidiaries.

Analyzes the activities of foreign banking organization to ensure consistency with U.S law.

Contributes to the development of regulatory policies.

Relationship Management and Application

Develops and operates an oversight program for each supervised financial institution in the District.

Maintains relationships with financial institutions and with other domestic and foreign supervisory authorities.

The Bank maintains over 200 individual account relationships.

Customers hold over $900 billion in assets at the Bank, more than half of the world's official U.S. dollar reserves.

The bank provides a secure website for the sole use of its official international customers. The site carries operation account information including service descriptions, guidelines and timeframes. Central bank customers can access contact information, holiday and fee schedules, and service announcements.

Open Market Operations

The Bank implements monetary policy primarily by conducting temporary and permanent open market operations. By buying and selling government securities, the Bank affects the aggregate level of balances available in the banking system, and the thus impacts the federal funds rate.

Federal Funds: Effective Rate vs. Target Rate

Open Market Operations: Key Concepts

Temporary open market operations involve repurchase and reverse repurchase agreements that are designed to temporarily add or drain reserves available to the banking system.

Permanent open market operations involve the buying and selling of securities outright to permanently add or drain reserves available to the banking system.

The federal funds rate is the interest rate at which depository institutions overnight.

Securities Lending

The Bank provides a secondary and temporary source of securities to the Treasury financing market through a Securities Lending program to promote smooth clearing of Treasury securities. The program offers securities for loan from the System Open Market Account (SOMA) portfolio in accordance with program terms and conditions. Securities loans are awarded to primary dealers based on competitive bidding in an auction held each business day at noon eastern standard time.

Securities Lending Transaction Volume Par value of securities lent per trading day ($ billions)

Securities Lending Activity

Securities loans are awarded to primary dealers based on competitive bidding in an auction held each business day at noon. Loaned securities that are not returned on the maturity date prior to the close of Fed wire will be extended for an additional business day and reprised at a rate determined by the FRBNYI. The data below summarizes the results of the New York Fed's Daily Securities Lending Activity for the current business day.

Check Processing at Federal Reserve Bank Regional Offices

As with Federal Reserve Bank and branches, Reserve Bank regional offices provide check processing services.

Regional offices are designed to speed the payments mechanism and check clearing. Processing checks at regional offices results in quicker identification of fraudulent and other invalid items.

Personal and corporate checks comprise the bulk of items deposited at regional offices.

Depository institutions in the United States may Deposit checks for processing at Federal Reserve Bank regional offices just as they do at Reserve Banks or branches.

Depository institutions include member and nonmember commercial banks, savings banks, saving and loan associations, credit unions and certain foreign bank agencies.

The type of institution eligible to deposit checks foe collection at Reserve Bank regional offices, Reserve Banks or branches was broadened by the International banking Act of 1978 and the Monetary Control Act (MCA) of 1980. The MCA mandated Reserve Banks to charge institutions, at explicit prices, for certain services, including check-related operations.

Today virtually any institution may deposit checks for processing at any Federal Reserve office by paying for the items in the deposit.

The Reserve Bank regional offices were proposed in 1971 to help improve the nation's payments mechanism. In 1972, the first regional office, the Baltimore-Washington unit of the Richmond Fed, became fully operational after a one-year test

Check Flows determine Boundaries

The regional offices receive deposits of checks from customers around the country and present them to institutions in the area the office serves. The procedure is the same as that followed at the Reserve Banks and branches.

The regional offices occasionally serve depository institutions in areas that may cross Federal Reserve District or state lines. Since the function of the regional offices is to accelerate nationwide check collection, boundaries for the centers are determined by check flows.

Regional offices routinely receive checks from other Reserve Bank regional offices, federal Reserve Banks and their branches, and “direct-sending” depository institution.

A direct-sending depository institution sends checks drawn on bank in other Reserve Districts directly to the appropriate Reserve Bank, branch or regional office. For example, some large New York City banks send checks drawn on Chicago banks directly to the Chicago Fed. The direct-sending bank gets credit for those checks in its reserve or clearing account at its Reserve Bank.

Rapid Check Clearing

The primary objective of a regional office is to process overnight checks drawn on financial institutions outside a city with a federal Reserve head office or branch. To accomplish this, the regional offices sort, clear and deliver checks rapidly.

For example, a Newark corporation deposits a check drawn on a bank in Asbury Park, N.J., to its account at a Newark bank on a Wednesday. Because there is a regional office serving the Asbury Park area (at East Rutherford, N.J.), the Newark bank sends the check to the regional office Wednesday evening.

The check is then processed at the regional center on high speed equipment and is presented for payment at the Asbury Park bank early Thursday.

The first stage of payment is made by charging the Asbury Park bank's account at the New York Fed.

Simultaneously, the regional office credits the account of the Newark bank. The Asbury Park bank charges the account of its customer-the check writer-and the Newark bank credits the deposit to the account of the Newark corporation.

Personal and corporate checks comprise the bulk of items deposited at reserve Bank regional offices. These checks are generally delivered to the regional office by private couriers hired by the depository institutions. Other items deposited t reserve bank regional offices include checks drawn on the Treasury and postal money orders.

However, most regional offices do not handle cash or securities. Reserve Bank head offices and branches offer a wide range of services.

Finally, in addition to providing speedy clearance, the processing of checks at a regional office results in quicker identification of fraudulent and other invalid items.

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VIII. Правление Губернаторов Федеральной Запасной Системы

IX. Иностранный Обмен

X. Роль Центральных Банков

XI. Наблюдение и Регулирование

XII. Действия свободного рынка

XIII. Предоставление ценных Бумаг

XIV. Проверьте Обработку в Федеральных Запасных Банковских Местных Отделениях