Selection of Reserve Bank and Branch Directors

Reserve Bank Directors (San Francisco)
Under the Federal Reserve Act, each Reserve Bank has a board of nine directors, all chosen from outside the Bank. They are divided into three classes – designated A, B, and C – of three persons each. The Class A and Class B directors are elected by the member commercial banks of each District – banks that own stock of the Reserve Bank. The Class C directors are appointed by the Board of Governors. The Act specifies that all directors shall be chosen without discrimination as to race, creed, color, sex, or national origin.

For the election of Class A and Class B directors, the law requires that the member banks of each District be classified into three groups based on the amount of capital – small, medium, and large. Each group of banks nominates and votes for one Class A director and one Class B director.

Class A directors represent the member banks, Class B and Class C directors are selected to represent the public “with due but not exclusive consideration to the interests of agriculture, commerce, industry, services, labor, and consumers,” according to the Federal Reserve Act. In addition to these six sectors, which are used by the Federal Reserve System as a guide for achieving diversity and balance in the backgrounds of the directors, Class B and Class C directors have been drawn from backgrounds not mentioned specifically in the Act. Reserve Bank directors are drawn from diverse backgrounds so that various viewpoints will be brought to bear on decisions relating to the administration of the Reserve Banks, as well as upon decisions and advice with respect to monetary policy and other policies.

Branch Directors (Los Angeles, Portland, Salt Lake City, and Seattle Branches)
Each Branch board of the San Francisco Reserve Bank consists of seven members. Branch directors are appointed by the parent Reserve Bank or the Board of Governors. Reserve Banks appoint four of the directors who must meet the occupational and eligibility requirements of the Head Office Class A or Class B Reserve Bank directors. The Branch directors appointed by the Board of Governors must meet the occupational and eligibility requirements of the Head Office Class C directors.

Tenure and Rotation

Reserve Bank directors and branch directors are elected or appointed for staggered three-year terms. When a director does not serve a full term, the successor director serves the unexpired portion of that term.

Leadership of the Boards

Reserve Bank Board
Each year, one Class C director at each Reserve Bank is designated by the Board of Governors as chairman of the Bank’s board of directors, and a second Class C director is designated deputy chairman.

Branch boards
One of the directors appointed by the Board of Governors at each Branch is designated annually as the chairman of the Branch Board.

Responsibilities of Directors

The roles of Reserve Bank directors are in three principal areas: overseeing the management of the Reserve Banks and Branches, participating in the formulation of national monetary and credit policies, and acting as a “link” between the government and the private sector.

In the exercise of its administrative responsibilities, a Reserve Bank’s board of directors reviews and establishes with management the Bank’s annual goals and objectives, reviews and approves the budget, and conducts an independent appraisal of the performance of both the Bank (including its efficiency and productivity) and its president and first vice president.

The Reserve Bank directors supervise, through a general auditor whom they appoint, and who reports directly to them, the maintenance of an effective system of internal auditing procedures.

Directors have a special role with respect to monetary policy and credit policy. In this function, directors, with their diverse backgrounds, bring to the Federal Reserve System the greatest benefits of regional autonomy: separate and eclectic viewpoints on economic and credit conditions. This input helps the Federal Reserve anticipate changing trends in the economy. At board meetings, they also have an opportunity to express their views as to whether monetary policy is “about right, too tight, or too easy.” The Federal Reserve Act gives each Reserve Bank the power to establish discount rates, subject to review and determination by the Board of Governors.

Another principal responsibility of each Reserve Bank board is to select a president who, in its judgment, will be qualified to participate in the monetary policy deliberations and decisions of the Federal Open Market Committee. Effective July 21, 2010, the Dodd-Frank Act allows only Class B and Class C directors to participate in the president appointment process.