What Is a Board of Governors? Overview and Key Responsibilities
Key Takeaways
- A board of governors is a group appointed to oversee the management of an institution.
- The Federal Reserve’s board of governors comprises seven members serving staggered 14-year terms.
- Governors analyze economic trends, regulate the Federal Reserve Banks, and influence monetary policy.
- The Federal Open Market Committee, responsible for U.S. monetary policy, includes seven board members.
- Jerome Powell is the current chair of the Federal Reserve Board of Governors.
What Is a Board of Governors?
A board of governors is an appointed group that oversees an institution’s management, policies, and accountability. A leading example is the Federal Reserve’s Board of Governors, which helps guide U.S. monetary policy and affects the broader economy; its members are nominated by the President, confirmed by the Senate, and serve staggered terms for continuity.
How a Board of Governors Functions
The U.S. central bank’s board of governors is composed of seven individuals who are appointed by the president and confirmed by the Senate. Members of the board of governors serve 14-year terms, running on a staggered basis to ensure continuity.
Legally, appointments to the board are to consist of a “fair representation of the financial, agricultural, industrial, and commercial interests and geographical divisions of the country.” In practice, appointments have predominantly been of academics and former banking professionals.
Important
Only one governor can represent a Federal Reserve District.
Key Responsibilities of the Federal Reserve Board
The board of governors has seven of the 12 seats on the Federal Open Market Committee (FOMC), the body responsible for setting U.S. monetary policy. The current Federal Reserve Board has seven members.
The presidents of five of the 12 regional Reserve Banks make up the remaining members of the FOMC.
The chair of the Fed’s board of governors is responsible for chairing the FOMC.
Responsibilities
The Federal Reserve Board:
- Analyzes domestic and international economic developments
- Supervises and regulates the operations of the Federal Reserve Banks
- Has responsibility for America’s payments system
- Oversees and administers most consumer credit protection laws
The board has authority over changes in reserve requirements, and it must approve any change in the discount rate initiated by a Federal Reserve Bank.
Members of the board frequently testify before congressional committees on the economy, monetary policy, banking supervision and regulation, consumer credit protection, and financial markets.
They are also responsible for supervising the work of the regional Fed banks, including approving budgets and appointing directors.
Notable Chairs of the Federal Reserve Board
The current Federal Reserve Chair is Jerome Powell. Recent, notable chairs of the Fed’s Board of Governors include:
- Janet Yellen, the first female chair to be appointed, served from 2014 to 2018
- Ben Bernanke, who led the Fed from 2006 to 2014 and oversaw a range of unconventional monetary policy actions to address the financial crisis of 2007-2008 and the recession that followed
- Alan Greenspan, whose time as chair spanned nearly 20 years and four presidential administrations
Fast Fact
There have been a total of 16 Chairs of the Board of Governors of the Federal Reserve of the United States.
Comparing Boards: Governors vs. Directors
Non-profit organizations, government divisions, and higher academic institutions typically have a board of governors as their governing body rather than a board of directors. Corporations, as required by law, have a board of directors appointed to oversee financial decisions and business operations.
When two or more boards exist within an entity, the board of governors often reigns supreme as the decision-making authority.
Who Nominates and Confirms the Fed Board of Governors?
Why Are the Fed Governors Appointed for Staggered 14-Year Terms?
The purpose of the staggered terms is to ensure stability and continuity.
Who Is the Current Chair of the Federal Reserve?
The current chair of the Federal Reserve is Jerome H. Powell. He was sworn in for a second four-year term on May 23, 2022. He assumed the role following his confirmation in February 2018.
What Are the 12 Banks of the Federal Reserve?
The 12 banks of the Federal Reserve are the Federal Reserve Banks of San Francisco, Minneapolis, Dallas, Kansas City, St. Louis, Chicago, Cleveland, Atlanta, Boston, New York, Richmond, and Philadelphia.
The Bottom Line
A board of governors is a group that oversees an institution’s operations and leadership, often setting policy direction and monitoring compliance. In this context, the focus is on the Federal Reserve’s Board of Governors, which analyzes economic developments, helps supervise regulatory compliance, and shapes U.S. monetary policy. Its members are appointed by the President and confirmed by the Senate.