WASHINGTON — One of the most powerful officials in the Federal Reserve System announced Thursday she plans to leave the central bank by the end of the year.

Sarah Dahlgren, who has headed the New York Fed's Financial Institution Supervisory Group since 2011 and has served at the bank since 1990, will resign from that position Oct. 1. She will stay on as a senior advisor to William Dudley, the bank's president, for a transitional period. The New York Fed said she is leaving to pursue outside opportunities.

As the head of FISG, Dahlgren was involved in spearheading the supervision of some of the largest and most complex financial institutions at a challenging time.

In a press release, Dudley praised Dahlgren's leadership, saying she was "never afraid to take on the most difficult assignments … with the highest levels of professionalism, integrity and dedication to public service."

He singled out Dahlgren's management of the Fed's $182 billion bailout of American International Group in 2008 and 2009. Her management was "essential to the Fed's ability to stabilize the financial system," Dudley said, adding that Dahlgren personally implemented "many important changes that improved the effectiveness of our supervision efforts."

The announcement came only months after the New York Fed came under fire from lawmakers and public interest groups for charges that it was too cozy with the banks it supervises. The allegations were sparked by a report from ProPublica and the public radio program "This American Life," which was based on secret recordings made inside the New York bank by former examiner Carmen Segarra.

Sen. Elizabeth Warren, D-Mass., led the criticism of the New York Fed's supervisory program, calling Dudley and his subordinates "Rent-a-Cops." Fed Chair Janet Yellen, meanwhile, defended Dudley, calling him a "distinguished public servant" and saying she has "a good deal of confidence" in the bank's supervision of the financial sector. The Fed nonetheless launched an internal investigation of its regional banks' supervisory programs to see what changes may be necessary to make the programs stronger.

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