The Federal Reserve Banking System and Central Banks

1 Office of the Comptroller of the Currency Board of Governors of the Federal Reserve System JUNE 21, 2012 (Updated November 20, 2012) FINANCIAL REMEDIATION FRAMEWORK FREQUENTLY ASKED QUESTIONS Financial Remediation Framework Approach 1. What is the purpose of the Financial Remediation Framework? The Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (FRB) have developed the financial remediation framework (the Framework) to provide examples of situations where compensation or other remediation is required for financial injury due to servicer errors, misrepresentations, or other deficiencies. The independent consultants will use the Framework to recommend remediation for financial injury identified during the Independent Foreclosure Review. The servicers will prepare remediation plans based on the independent consultants’ recommendations. The federal banking regulators must approve each servicer’s remediation plan. The categories included in the Framework are not intended to be exhaustive or to cover all possible situations or remediation options for borrowers who may require compensation or other remediation for financial injury. 2. Will the regulators issue updates to the Framework periodically? The OCC and FRB do not plan to make updates to the Framework. We recognize that the independent consultants may identify other situations or remediation options that are not covered in the Framework. In those cases, the independent consultants may recommend other remediation or compensation for the servicers to use in preparing their remediation plans, which will be subject to regulator approval. 3. Will the regulators issue updates to these Frequently Asked Questions periodically? The OCC and FRB intend to update these Frequently Asked Questions (FAQs) as appropriate. 4. Can a borrower get remediation under more than one category in the Framework? Borrowers who suffered one of the injuries in categories 1 through 4 will only receive the remediation described under the category that provides the highest remediation amount because the remediation is intended to cover all financial injuries related to the foreclosure process. Where the remediation is not intended to cover all financial injuries related to the foreclosure process, borrowers may receive remediation or compensation for more than one category if they suffered separate injury. For example, if a borrower was never solicited for a loan modification under category 7 and was improperly charged fees under category 13, they will receive remediation under both categories. On the other hand, a borrower who has been wrongfully 2 denied a loan modification under category 5 will not receive $500 for a credit reporting error under category 13 because that is already covered under category 5. 5. If the Framework is supposed to address direct financial injury, why does it include a number of fixed dollar payments? The fixed dollar payments approximate an amount of direct financial injury that borrowers may have suffered as a result of a specific error. The Federal Reserve Banking System and Central Banks The Federal Reserve Banking System and Central Banks By: OpenStaxCollege In making decisions about the money supply, a central bank decides whether to raise or lower interest rates and, in this way, to influence macroeconomic policy, whose goal is low unemployment and low inflation The central bank is also responsible for regulating all or part of the nation’s banking system to protect bank depositors and insure the health of the bank’s balance sheet The organization responsible for conducting monetary policy and ensuring that a nation’s financial system operates smoothly is called the central bank Most nations have central banks or currency boards Some prominent central banks around the world include the European Central Bank, the Bank of Japan, and the Bank of England In the United States, the central bank is called the Federal Reserve—often abbreviated as just “the Fed.” This section explains the organization of the U.S Federal Reserve and identifies the major responsibilities of a central bank Structure/Organization of the Federal Reserve Unlike most central banks, the Federal Reserve is semi-decentralized, mixing government appointees with representation from private-sector banks At the national level, it is run by a Board of Governors, consisting of seven members appointed by the President of the United States and confirmed by the Senate Appointments are for 14-year terms and they are arranged so that one term expires January 31 of every evennumbered year The purpose of the long and staggered terms is to insulate the Board of Governors as much as possible from political pressure so that policy decisions can be made based only on their economic merits Additionally, except when filling an unfinished term, each member only serves one term, further insulating decision-making from politics Policy decisions of the Fed not require congressional approval, and the President cannot ask for the resignation of a Federal Reserve Governor as the President can with cabinet positions 1/5 The Federal Reserve Banking System and Central Banks One member of the Board of Governors is designated as the Chair For example, from 1987 until early 2006, the Chair was Alan Greenspan From 2006 until 2014, Ben Bernanke held the post The current Chair, Janet Yellen, has made many headlines already Why? See the following Clear It Up feature to find out Who has the most immediate economic power in the world? Chair of the Federal Reserve Board Janet L Yellen is the first woman to hold the position of Chair of the Federal Reserve Board of Governors (Credit: Board of Governors of the Federal Reserve System) What individual can make financial market crash or soar just by making a public statement? It is not Bill Gates or Warren Buffett It is not even the President of the United States The answer is the Chair of the Federal Reserve Board of Governors In early 2014, Janet L Yellen, shown in [link] became the first woman to hold this post Yellen has been described in the media as “perhaps the most qualified Fed chair in history.” With a Ph.D in economics from Yale University, Yellen has taught macroeconomics at Harvard, the London School of Economics, and most recently at the University of California at Berkeley From 2004–2010, Yellen was President of the Federal Reserve Bank of San Francisco Not an ivory tower economist, Yellen became one the few economists who warned about a possible bubble in the housing market, more than two years before the financial crisis occurred Yellen served on the Board of Governors of the Federal Reserve twice, most recently as Vice Chair She also spent two years as Chair of the President’s Council of Economic Advisors If experience and credentials mean anything, Yellen is likely to be an effective Fed chair The Fed Chair is first among equals on the Board of Governors While he or she has only one vote, the Chair controls the agenda, and is the public voice of the Fed, so he or she has more power and influence than one might expect Visit this website to see who the current members of the Federal Reserve Board of Governors are You can follow the links provided for each board member to learn more about their backgrounds, experiences, and when their terms on the board will end 2/5 The Federal Reserve Banking System and Central Banks The Federal Reserve is more than the Board of Governors The Fed also includes 12 regional Federal Reserve banks, each of which is responsible for supporting the commercial banks and economy generally in its district The Federal Reserve districts and the cities where their regional headquarters are located are shown in [link] The commercial banks in each district elect a Board of Directors for each regional Federal Reserve bank, and that board chooses a president for each regional Federal Reserve district Thus, the Federal Reserve System includes both federally and private-sector appointed leaders The Twelve Federal Reserve Districts ...SR Letter 12-7 Attachment 1 Board of Governors of the Federal Reserve System Federal Deposit Insurance Corporation Office of the Comptroller of the Currency Guidance on Stress Testing for Banking Organizations with Total Consolidated Assets of More Than $10 Billion May 14, 2012 I. Introduction All banking organizations should have the capacity to understand fully their risks and the potential impact of stressful events and circumstances on their financial condition. The U.S. federal banking agencies have previously highlighted the use of stress testing as a means to better understand the range of a banking organization’s potential risk exposures. 1 The 2007- 2009 financial crisis underscored the need for banking organizations to incorporate stress testing into their risk management practices, demonstrating that banking organizations unprepared for stressful events and circumstances can suffer acute threats to their financial condition and 1 See, e.g., Supervision and Regulation Letter SR 10-6, OCC Bulletin 2010-13 or FDIC Financial Institution Letter (FIL) 13-2010, Interagency Policy Statement on Funding and Liquidity Risk Management (March 17, 2010), available at http://www.federalreserve.gov/boarddocs/srletters/2010/sr1006.htm (hereinafter Funding and Liquidity Risk Management Policy Statement); Supervision and Regulation Letter SR 10-1, OCC Bulletin 2010-1 or FDIC FIL-2-2010, Interagency Advisory on Interest Rate Risk (January 11, 2010), available at http://www.federalreserve.gov/boarddocs/srletters/2010/sr1001.htm (hereinafter Interest Rate Risk Advisory); Supervision and Regulation Letter SR 09-4, Applying Supervisory Guidance and Regulations on the Payment of Dividends, Stock Redemptions, and Stock Repurchases at Bank Holding Companies (revised March 27, 2009), available at http://www.federalreserve.gov/boarddocs/srletters/2009/SR0904.htm (hereinafter SR 09-04); Supervision and Regulation Letter SR 07-1, OCC Bulletin 2006-46 or FDIC FIL-104-2006, Interagency Guidance on Concentrations in Commercial Real Estate (January 4, 2007), available at http://www.federalreserve.gov/boarddocs/srletters/2007/SR0701.htm; Supervision and Regulation Letter SR 01- 4, OCC Bulletin 2001-6 or FDIC FIL-9-2001, Subprime Lending (January 31, 2001), available at http://www.federalreserve.gov/boarddocs/srletters/2001/SR0104.htm; Supervision and Regulation Letter SR 99- 18, Assessing Capital Adequacy in Relation to Risk at Large Banking Organizations and Others with Complex Risk Profiles (July 1, 1999), available at http://www.federalreserve.gov/boarddocs/srletters/1999/SR9918.htm (hereinafter SR 99-18); Supervisory Guidance: Supervisory Review Process of Capital Adequacy (Pillar 2) Related to the Implementation of the Basel II Advanced Capital Framework, 73 FR 44620 (July 31, 2008) (hereinafter Supervisory Review Process of Capital Adequacy); The Supervisory Capital Assessment Program: Overview of Results (May 7, 2009), available at http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20090507a1.pdf; Comprehensive Capital Analysis and Review: Objectives and Overview (March 18, 2011), available at http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20110318a1.pdf; and 12 CFR 225.8. SR Letter 12-7 Attachment 2 viability. 2 The Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (collectively, the “agencies”) are issuing this guidance to emphasize the importance of stress testing as an ongoing risk management practice that supports banking organizations’ PROTOCOL ON THE STATUTE OF THE EUROPEAN SYSTEM OF CENTRAL BANKS AND OF THE EUROPEAN CENTRAL BANK * THE HIGH CONTRACTING PARTIES, DESIRING to lay down the Statute of the European System of Central Banks and of the European Central Bank provided for in Article 8 of the Treaty establishing the European Community, HAVE AGREED upon the following provisions, which shall be annexed to the Treaty establishing the European Community. CHAPTER I CONSTITUTION OF THE ESCB Article 1 The European System of Central Banks 1.1. The European System of Central Banks (ESCB) and the European Central Bank (ECB) shall be established in accordance with Article 8 of this Treaty; they shall perform their tasks and carry on their activities in accordance with the provisions of this Treaty and of this Statute. 1.2. In accordance with Article 107(1) of this Treaty, the ESCB shall be composed of the ECB and of the central banks of the Member States ('national central banks'). The Institut monétaire luxembourgeois will be the central bank of Luxembourg. CHAPTER II OBJECTIVES AND TASKS OF THE ESCB Article 2 Objectives In accordance with Article 105(1) of this Treaty, the primary objective of the ESCB shall be to maintain price stability. Without prejudice to the objective of price stability, it shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community as laid down in Article 2 of this Treaty. The ESCB shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources, and in compliance with the principles set out in Article 4 of this Treaty. Article 3 Tasks 3.1. In accordance with Article 105(2) of this Treaty, the basic tasks to be carried out through the ESCB shall be: — to define and implement the monetary policy of the Community; — to conduct foreign-exchange operations consistent with the provisions of Article 111 of this Treaty; — to hold and manage the official foreign reserves of the Member States; — to promote the smooth operation of payment systems. 3.2. In accordance with Article 105(3) of this Treaty, the third indent of Article 3.1 shall be without prejudice to the holding and management by the governments of Member States of foreign-exchange working balances. * Protocol annexed to the Treaty establishing the European Community (OJ C 191, 29.7.1992, p. 68), as amended by the Treaty of Amsterdam (OJ C 340, 10.11.1997, p.1), the Treaty of Nice (OJ C 80, 10.3.2001, p. 1), Council Decision 2003/223/EC (OJ L 83, 1.4.2003, p. 66) and the Act concerning the conditions of Accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to [...]... European systems of banking, the branch system is widely employed, which accounts for the centralization of the system of banking In the United States branch banking has been practically prohibited ever since the inauguration of the national banking system, either as a result of law or of conditions and cus- toms equivalent thereto Upon the banking system thus organized has now been superimposed the Federal. .. trustee, and the like, acting as administrator, registering stocks and The Federal Reserve io and bonds, otherwise performing fiduciary duties Shortly after the Constitution of the United States was adopted, Alexander Hamilton, who was then Secretary of the Treasury, secured the adoption by Congress of a plan for the Bank establishment of a This was the so-called " of the United States First Bank of the United. .. RESERVE SYSTEM 297 APPENDIX 313 INDEX 278 " 333 xiii THE FEDERAL RESERVE CHAPTER I BANKING IN THE UNITED STATES IN THE United States to-day three distinct of banking may be distinguished: systems (1) The national banking system organized under Federal law The commercial banking system organ- (2) ized under the laws of the several States The system of special institutions organunder State laws, and including... United States, " which was granted a charter for twenty was allowed to lapse years shortly before the War of 1812 There was then no sub-treasury system, and the closing That of the First charter Bank of the United States, which held the funds of the national Government, necessitated the redepositing of these funds in State banks Most of the State banks were small and unsatisfactory; many failed The United. .. percentage of the face thereof The 12 Federal Reserve form of national currency This was behave the double advantage of creating a demand for Government bonds, and in the lieved likely to of unifying the currency The State banks accepted national charters so slowly, however, and so few new national banks were organized, that Congress, shortly after the close of the Civil War, imposed a tax of 10 per...INTRODUCTION of great importance that the American people should understand fully not only the text of the Federal Reserve Act, but, as well, its IT is history during the process of enactment, and I am sure that this book deepest pleasure by the subject of banking all will be read with the who are interested in The Federal Reserve Act has already been, and be in the future, of the greatest advantage, not alone... United States Government was not able to accommodation from the State banks get good during the War of 1812 When peace returned a plan for another Bank of the United States was put forward, and the chartered period in with institution was finally a twenty-year life The Second Bank of the United States 1816, Government deposits and acted as FisAgent It was an efficient institution, but held the cal it... incurred the enmity of those in charge ... prominent central banks around the world include the U.S Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England 4/5 The Federal Reserve Banking System and Central Banks. .. leaders The Twelve Federal Reserve Districts There are twelve regional Federal Reserve banks, each with its district 3/5 The Federal Reserve Banking System and Central Banks What Does a Central. .. will end 2/5 The Federal Reserve Banking System and Central Banks The Federal Reserve is more than the Board of Governors The Fed also includes 12 regional Federal Reserve banks, each of which is