The revised rules implement the statutory requirements established by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and impose additional controls designed to enhance the New York Fed’s corporate governance policies.
As a result of Dodd-Frank, only Class B and Class C directors can appoint the presidents and first vice presidents of Reserve Banks. Class A directors, who represent banks, no longer have a role in the appointment of these officials. The New York Fed’s rules include additional restrictions on Class A directors, which limit their membership on the New York Fed’s Nominating and Corporate Governance and Audit and Operational Risk committees.
The revised rules formalize the long-held practice whereby all directors are prohibited from playing any role in bank supervision matters. This restriction is expanded to include any role for Class A directors in appointing the senior leadership of the Bank Supervision Group and approving its budget.
Reserve Bank directors, by federal law and Federal Reserve policy, must adhere to strict conflict of interests’ standards in the fulfillment of their duties. The New York Fed’s revised rules enhance the existing standards.
About the Reserve Banks’ Boards of Directors
The Federal Reserve Act of 1913 requires each of the Reserve Banks to operate under the supervision of a board of directors. Each Reserve Bank has nine directors, who represent the interests of their Reserve District and whose experience provides the Reserve Banks with a wider range of expertise that helps them fulfill their policy and operational responsibilities. The nine directors of each Reserve Bank are divided evenly by classification: Class A directors represent the member banks in the District; Class B directors and Class C directors represent the interests of the public. The directors of the Reserve Banks act as an important link between the Federal Reserve and the private sector, ensuring that the Fed’s decisions on monetary policy are informed by actual economic conditions.