The Federal Reserve seeks input from a variety of stakeholders to assist it in making decisions about monetary policy, banking supervision and other responsibilities. Earlier this month, we took a look at the contributions of Reserve bank boards of directors and detailed how they are selected and what they do and don’t do as board members.
Like most corporations, each of the nation’s 12 Federal Reserve banks and their branch offices is governed by a board of directors. While many of their duties are similar to those of corporate boards, these boards do have some unique responsibilities as well as restrictions on activities and oversight.
Read More about Role of Bankers on Federal Reserves Boards of Directors
This is the second part of an article that describes how banks have accommodated the very large involuntary increase in their Fed reserve balances that corresponds to Fed asset purchases. In this post, I show that banks increased their deposit funding substantially, allowing them to reduce nondeposit borrowings. “Core” deposits—deposits excluding large time deposits—also increased significantly, offset, in part, by a decline in large time deposits, which are deposits above $100,000. Concurrently, equity financing declined as a share of assets. I conclude that Fed asset purchases are not responsible directly for the surge in deposits and reduction in other liabilities and equities. Rather, both Fed and bank portfolio shifts are responses to heightened economic stress and uncertainty.
The Federal Reserve’s acquisition of $4.4 trillion of bonds since February 2020 more than doubled the size of its balance sheet. Meanwhile, commercial banks’ balance sheets expanded by about $4.2 trillion in aggregate. Despite similar expansions, links between the Fed’s and the banking system’s balance sheets are complex.
On December 1, 2021, the Federal Reserve finalized changes to the FR 2052a (6G) report effective May 1, 2022, for banking organizations subject to Category I standards and October 1, 2022, for banking organizations subject to Category II–IV standards. The Federal Register Notice can be found here.
An informational Ask the Fed® session on Thursday, January 27, 2022, will walk through the technical documentation and XML schema intended to assist firms in developing data files to ensure successful transmission to the Federal Reserve Bank. The final instructions, the XML schema that implements these instructions, supporting technical documentation, sample XML files and other supporting materials can be found below.