The main objectives of the FRS are as follows:
- establishing and maintaining a balance of interests of society, the state and commercial banks;
- control over the activities of banks, if necessary – regulation of their work;
- protection of the interests of borrowers;
- stimulating economic growth by issuing and credit instruments;
- stimulation of maximum employment of the population with the help of monetary and credit levers;
- ensuring a stable dollar exchange rate, inflation and price level;
- maintaining the balance of the US financial and credit system;
- providing the necessary liquidity to the lowest-tier banks, i.e. providing them with credit funds;
- financial services for government agencies and international structures;
- organization and regulation of payment systems.
The Fed’s decisions have a tremendous impact on the global financial and stock markets.
Federal Reserve Banks
In addition to the FRS, the first tier of the US banking system is 12 Federal Reserve Banks. Each of them has its own region of service:
The Federal Reserve Banks serve other banks in much the same way they serve customers:
- reserve banks accept commercial bank funds as deposits;
- reserve banks make loans to lower-tier banking and non-banking institutions.
The fixed capital of federal reserve banks is formed from deposits of commercial banks and government funds, equity capital is small.
Commercial banks become participants of the lowest level of the FRS, voluntarily or at the request of the law. Their activities are more strictly regulated, they have the obligation to keep a certain percentage of capital as a reserve in federal banks.
US commercial banks
There are about 40 thousand commercial banks of different status, size and specialization in the USA. These banks carry out the whole range of banking operations with all categories of clients.
The main assets of US commercial banks are made up of deposits from citizens and businesses. The main volume of transactions falls on various types of loans.
All American commercial banks are divided into:
- National banks. They are subject to federal law and must be part of the Fed.
- State banks. Operates in accordance with the laws of the state in which they are located. Small banks of this type may not join the Fed.
Financial laws differ from state to state, which made it difficult for banks in one state to open branches in another. These banks were called (Unit Banks). But banks at the national level opened branches and branches and were called (Branch Banks). Most of the restrictions were lifted in 1994, but the difference in the operation of different types of banks remained.
