Federal Reserve
FedAlso called federal Reserve System, federal Reserve Board
The Federal Reserve is the central bank of the United States. Created in 1913, it sets monetary policy and supervises bank holding companies, state member banks and the US operations of foreign banks. It writes capital, liquidity and risk management rules and enforces them through examinations and enforcement actions.
How it works
The system has three parts: the Board of Governors in Washington, 12 regional Reserve Banks and the Federal Open Market Committee, which sets interest rate policy. Supervision staff at the Board and the Reserve Banks examine firms, run annual stress tests for large banks and issue supervision and regulation letters, known as SR letters, that set expectations on topics such as model risk and third parties.
For compliance and risk teams, Fed guidance shapes how banking groups govern models, data and controls. SR 26-2, issued on 17 April 2026, replaced SR 11-7 and SR 21-8 as the Fed's model risk guidance. The Fed also enforces the Bank Secrecy Act at the firms it supervises, and it publishes enforcement actions including consent orders and civil money penalties.
The rules
Created the Federal Reserve System, its Board of Governors and the regional Reserve Banks, and sets out their powers.
The Federal Reserve System and its member banksMakes the Federal Reserve the consolidated supervisor of bank holding companies and limits their permitted activities.
Companies that control a US bankSets current supervisory expectations for model risk management and supersedes SR 11-7 and SR 21-8.
Banking organisations supervised by the Federal ReserveCommon questions
Which firms does the Federal Reserve supervise?
The Fed supervises bank holding companies, savings and loan holding companies, state chartered banks that are members of the Federal Reserve System, and the US operations of foreign banking organisations. National banks are supervised by the OCC and state non-member banks by the FDIC.
What is an SR letter?
SR letters are supervision and regulation letters issued by the Board's staff. They set out policy and supervisory expectations for the firms the Fed oversees, on topics such as model risk, third-party risk and compliance programmes. Examiners use them when assessing firms.
What replaced SR 11-7?
SR 26-2, issued on 17 April 2026, superseded SR 11-7 and SR 21-8. It is now the Federal Reserve's main guidance on model risk management, covering how banking organisations develop, validate, use and govern models, including those used in compliance.
Can the Federal Reserve fine banks?
Yes. The Fed can bring formal enforcement actions, including cease and desist orders, written agreements, consent orders and civil money penalties, against the institutions it supervises and against individuals connected with them. It publishes these actions on its website.
