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Financial System Supervisors

Community bankers: Looking for resources?

Community Banking Connections provides guidance and tools to help community banks across the United States. The Federal Reserve System publication serves to clarify key supervisory guidance, highlight new regulation, provide perspectives from both bank examiners and Federal Reserve staff, and address challenges and concerns facing community banks, providing resources to assist them.

In its role of financial system supervisors, the Cleveland Fed is working to provide a safer, more flexible, and more stable monetary and financial system. There are 12 Reserve Banks across the country, plus the Board of Governors, which is the hub of the Federal Reserve. The governance structure of the Federal Reserve is designed to be independent within the government.

The Cleveland Fed has a dual perspective in its role of financial system supervisors. Microprudential supervision focuses on the individual firms to ensure that financial institutions operate in a safe and sound manner, provide access to credit fairly and equitably, and comply with laws, regulations, and mandates. Macroprudential supervision focuses on the financial system to monitor financial stability throughout the financial system.

The Federal Reserve Bank of Cleveland supervises around 270 financial institutions headquartered in the Fourth Federal Reserve District, which comprises Ohio, western Pennsylvania, the northern panhandle of West Virginia, and eastern Kentucky. Included in that number are commercial banks, savings and loan holding companies, and bank holding companies, or companies that own banks.

What happens when the Cleveland Fed finds it is concerned with the financial performance when supervising an institution?

It may take certain actions, such as issuing a memorandum of understanding, an informal, yet severe, action. In such memorandums, a member bank’s board of directors agrees to address deficiencies the Cleveland Fed identifies.

So-called formal actions, which are administered not by the Cleveland Fed but by the Board of Governors (our central bank’s hub), include cease-and-desist orders and civil monetary penalties. Cease-and-desist orders are used to effect immediate correction of issues.

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