Fed’s 2017 financial statements show funding for consumer bureau, board and bank financials

The 2017 financial statements of the Federal Reserve Board of Governors (Fed) and the 12 Federal Reserve Banks received unqualified (clean) audit opinions, the Fed said in releasing the statements Friday. Unqualified opinions were also issued on the board’s and banks’ internal controls over financial reporting.

“The audited financial statements provide a significant amount of information about the assets, liabilities, and earnings of the Reserve Banks and the Board as of December 31, 2017,” the Fed said in its release, “including information about the composition, fair value, and earnings related to the $4.4 trillion of U.S. Treasury securities, government-sponsored enterprise (GSE) debt securities, and federal agency and GSE mortgage-backed securities acquired through open market operations.”

It said Reserve Banks’ assets as of Dec. 31, 2017, totaled approximately $4.4 trillion, similar to the balance on Dec. 31, 2016.

During 2017, the Fed’s 12 district banks earned about $80.7 billion and provided for remittances to the U.S. Treasury of $80.6 billion, according to the release. Interest income on securities acquired through open market operations totaled $113.6 billion – up $2.5 billion from 2016. Gains from the daily revaluation of foreign currency denominated investments totaled $1.9 billion.

As for expenses, a few highlights below:

  • Interest expense on depository institutions’ reserve balances and term deposits was $25.8 billion, up $13.8 billion from the previous year.
  • Interest expense on securities sold under agreements to repurchase was $3.4 billion, up $2.2 billion from the previous year.
  • Reserve Bank operating expenses totaled $6.8 billion, including assessments of $2 billion for Fed Board expenses, currency costs, and operations of the Consumer Financial Protection Bureau (CFPB) operations. The CFPB-related costs totaled $573 million.

The CFPB was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) as an independent bureau within the Federal Reserve System and gets the bulk of its funding from the Fed (by law, up to a percentage of Federal Reserve System total operating expenses). Levied as fees on individual Fed banks, this money is deposited into a CFPB fund that is maintained at the New York Fed. (The CFPB also collects civil money penalties for federal consumer financial law violations. That money is deposited into a Consumer Financial Civil Penalty Fund, also kept at the New York Fed.)

The Fed Board engages KPMG LLP, an independent public accounting firm, to conduct the annual audits. Financial statement audits follow standards issued by the American Institute of Certified Public Accountants, the Public Company Accounting Oversight Board, and, for the Board of Governors audit only, the Generally Accepted Government Auditing Standards.

Federal Reserve System Publishes Annual Financial Statements

Federal Reserve System Financial Reports