The Federal Reserve System was created by the Federal Reserve Act of 1913 as a response to a number of banking scares throughout the United States. The duties and responsibilities of the Federal Reserve System have grown considerably over the years and now, include conducting the nations monetary policy, supervising and regulating banking institutions, maintaining stability within the financial system, and providing depository services to depository institutions. In order to carry out those duties and responsibilities, rules and regulations must be implemented in the form of a federal reserve regulation.
The banking system in all countries, including the United States, is an incredibly complex web of checks and balances. The Federal Reserve System is essentially responsible for maintaining financial security within the United States since the baking collapse of 1929 which led to the Great Depression. As such, the Federal Reserve has a considerable amount of autonomy to enact a federal reserve regulation. Although subject to congressional oversight, the Federal Reserve does not need acquiescence from the President or any other authority within the government in order to create or implement a federal reserve regulation.
Often, a federal reserve regulation applies directly to consumers. In most cases, however, federal reserve regulations are directed at banking institutions, investors, or other components of the financial market. The regulations enacted by the Federal Reserve are labeled by letters, such as "Regulation X," and can be easily located on the Federal Reserve System's website.
The Federal Reserve, for example, sets the reserve balance required by all depository institutions. The reserve requirement, found in Regulation D, requires each institution to maintain a specific amount on reserve, either with one of the Federal Reserve banks or in cash, at all times. The reserve requirement is subject to change by the Federal Reserve as policy dictates.
Regulation E, as another example, addresses electronic funds transfers. The federal reserve regulation E determines how electronic funds transfers may be accomplished and protects consumers when they make an electronic funds transfer in the event of a problem. Regulation H sets the standards by which a state bank may become a member of the Federal Reserve System, which can be very important as membership not only affords the bank a number of privileges but also gives depositors a considerable amount of security when their funds are held in a bank that is a member of the Federal Reserve System.