Oct. 19 (Bloomberg) -- A Government Accountability Office report on Federal Reserve governance released today said that the nine-member boards of reserve banks lacked racial and ethnic diversity in 2006 to 2010, and noted that further work is needed to avoid potential conflicts of interest.
The Fed revised its rules for reserve bank directors in 2009 after potential conflicts emerged during the 2008-2009 financial crisis. Even so, the GAO said, the Fed needs to take “additional steps to strengthen controls designed to manage conflicts of interest” and to increase public disclosure of directors’ roles and responsibilities.
“More can be done to enhance the transparency of the reserve banks’ governance practices,” the GAO report said. It recommended that all reserve banks “clearly document the roles and responsibilities of the directors, including restrictions on their involvement in supervision and regulation activities, in their bylaws.”
The GAO audit of Fed governance was required by the Dodd- Frank Act signed into law last year. The report makes four recommendations aimed at enhancing diversity of Federal Reserve bank boards, strengthening policies for managing conflicts of interest and enhancing transparency.
“The Federal Reserve believes all have merit and will work to implement each of them,” Fed Chairman Ben S. Bernanke said in a reply included with the report
--Editors: Christopher Wellisz, Kevin Costelloe
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