In the area of bank supervision, which of the following are functions of the Federal Reserve Banks?

Examinations of state member banks
Approval of member bank and bank holding company acquisitions
Deposit insurance

Question

In the area of bank supervision, which of the following are functions of the Federal Reserve Banks?

Examinations of state member banks
Approval of member bank and bank holding company acquisitions
Deposit insurance

BlackTom AI · Accepted Answer

The question asks which items are functions of the Federal Reserve Banks in bank supervision.
Option 1 (I and II only): Examinations of state member banks and approval of member bank and bank holding company acquisitions. This pair aligns with the known roles of Federal Reserve Banks: they conduct examinations of state member banks and they review and approve certain acquisitions involving member banks and bank holding companies.

Option 2 (II and III only): This would state that approval of acquisitions and deposit insurance are Fed functions. While the Fed does handle approvals for certain bank holding company acquisitions, deposit insurance is not a function of the Federal Reserve Banks; deposit insurance is provided by the Federal Deposit Insurance Corporation (FDIC). Therefore, III is incorrect, making this option invalid.

Option 3 (I and II only): This repeats the correct pairing from Option 1, asserting examinations of state member banks and approval of acquisitions as Fed functions, and excludes deposit insurance. Since deposit insurance is not a Fed function, this option correctly omits III and includes I and II, matching the true responsibilities of the Fed in supervision.

Option 4 (I only): This would claim only examinations of state member banks are Fed functions. While examinations are indeed one function, excluding the approval of acquisitions omits another legitimate Fed supervisory function, so this option is incomplete.

Option 5 (I, II, and III): This asserts all three items are Fed functions. Since deposit insurance (III) is not a function of the Federal Reserve Banks, this option overstates the Fed’s role and is incorrect.

In summary, the only choice that correctly includes the supervisory responsibilities that the Federal Reserve Banks actually perform (examinations of state member banks and approvals related to acquisitions) while excluding the deposit insurance function is the option that lists I and II only. The other options either include III wrongly or omit a correct item.

In the area of bank supervision, which of the following are functions of the Federal Reserve Banks? Examinations of state member banks Approval of member bank and bank holding company acquisitions Deposit insurance

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