What Is a Board of Governors?
The term board of governors refers to a group of people that oversees or manages the running of an institution. The U.S. Postal Service, the BBC, the World Bank, numerous colleges and universities, as well as professional organizations (such as the CFA Institute), and regulatory bodies (such as the Financial Industry Regulatory Authority (FINRA)) all have boards of governors. In the financial world, the best-known board of governors is that of the Federal Reserve, the United States' central bank.
- A board of governors is a group of people appointed to oversee an organization's operations, including financial matters.
- The most well-known board of governors is the Federal Reserve, whose responsibilities include analyzing domestic and international economic developments and overseeing operations of the Federal Reserve Banks.
- A board of directors is an appointed group that oversees a corporation's business.
- The Federal Reserve's board of governors is nominated by the President and is confirmed by the Senate.
- A competent and well-organized board of governors is seen as a key component of the success of an organization.
Understanding a Board of Governors
The U.S. central bank's board of governors is composed of seven individuals who are appointed by the president and confirmed by the Senate. Members of the board of governors serve 14-year terms, running on a staggered basis to ensure continuity.
Legally, appointments to the board are to consist of a "fair representation of the financial, agricultural, industrial, and commercial interests and geographical divisions of the country.” In practice, appointments have predominantly been of academics and former banking professionals.
Only one governor can represent a Federal Reserve District.
Duties of the Federal Reserve Board of Governors
The board of governors has seven of the 12 seats on the Federal Open Market Committee (FOMC), the body responsible for setting U.S. monetary policy. The current Federal Reserve Board has six members, with one vacancy as of May 2022. The presidents of five of the 12 regional Reserve Banks make up the remaining members of the FOMC. The chair of the Fed’s board of governors is responsible for chairing the FOMC.
The Federal Reserve Board:
- Analyzes domestic and international economic developments
- Supervises and regulates the operations of the Federal Reserve Banks
- Has responsibility for America's payments system
- Oversees and administers most consumer credit protection laws
The board has authority over changes in reserve requirements, and it must approve any change in the discount rate initiated by a Federal Reserve Bank.
Members of the board frequently testify before congressional committees on the economy, monetary policy, banking supervision and regulation, consumer credit protection, and financial markets. They are also responsible for supervising the work of the regional Fed banks, including approving budgets and appointing directors.
Chairs of the Board of Governors
The current Federal Reserve Chair is Jerome Powell. Recent, notable chairs of the Fed’s Board of Governors include:
- Janet Yellen, the first female chair to be appointed and served from 2014 to 2018
- Ben Bernanke, who led the Fed from 2006 to 2014 and oversaw a range of unconventional monetary policy actions to address the financial crisis of 2007-2008 and the recession that followed
- Alan Greenspan, whose time as chair spanned nearly 20 years and four presidential administrations
There have been a total of 16 Chairs of the Board of Governors of the Federal Reserve of the United States.
Board of Governors vs. Board of Directors
Non-profit organizations, government divisions, and higher academic institutions typically have a board of governors as their governing body rather than a board of directors. Corporations, as required by law, have a board of directors appointed to oversee financial decisions and business operations.
When two or more boards exist within an entity, the board of governors often reigns supreme as the decision-making authority.
Who Are the Current Board of Governors?
A maximum of seven governors can serve on the Board of Governors of the Federal Reserve. The members of the current Board of Governors of the Federal Reserve are Jerome H. Powell, Lael Brainard, Michelle W. Bowman, Lisa D. Cook, Philip N. Jefferson, and Christopher J. Waller. One seat remains vacant as of May 2022.
Who Nominates and Confirms the Fed Board of Governors?
The governors of the Board of Governors of the Federal Reserve are nominated by the President of the United States of America and confirmed by the U.S. Senate.
Why Are the Fed Governors Appointed for Staggered 14-Year Terms?
The purpose of the staggered terms is to ensure stability and continuity over time.
Who Is the Current Chair of the Federal Reserve?
The current chair of the Federal Reserve is Jerome H. Powell. He was sworn in for a second four-year term on May 23, 2022. He assumed the role following his confirmation in February 2018.
What Are the 12 Banks of the Federal Reserve?
The 12 banks of the Federal Reserve are the Federal Reserve Banks of San Francisco, Minneapolis, Dallas, Kansas City, St. Louis, Chicago, Cleveland, Atlanta, Boston, New York, Richmond, and Philadelphia.
The Bottom Line
A board of governors is a group of highly qualified individuals that are responsible for overseeing and managing an institution. Most institutions, from corporations to nonprofit organizations to media outlets to government bodies have a board of governors. The most well-known board of governors is that of the U.S. Federal Reserve Board.