Who issues discount loans

By making funds readily available at the primary credit rate the primary credit program complements open market operations in the implementation of monetary policy.

Reserve Banks ordinarily do not require depository institutions to provide reasons for requesting very short-term primary credit. Rather, borrowers are asked to provide only the minimum information necessary to process a loan, usually the amount and term of the loan. Secondary Credit Secondary credit is available to depository institutions that are not eligible for primary credit.

It is extended on a very short-term basis, typically overnight, at a rate that is above the primary credit rate. Secondary credit is available to meet backup liquidity needs when its use is consistent with a timely return to a reliance on market sources of funding or the orderly resolution of a troubled institution. Secondary credit may not be used to fund an expansion of the borrower's assets.

The secondary credit program entails a higher level of Reserve Bank administration and oversight than the primary credit program. A Reserve Bank must have sufficient information about a borrower's financial condition and reasons for borrowing to ensure that an extension of secondary credit would be consistent with the purpose of the facility. Seasonal Credit The Federal Reserve's seasonal credit program is designed to assist small depository institutions in managing significant seasonal swings in their loans and deposits.

Eligible institutions are usually located in agricultural or tourist areas. The interest rate applied to seasonal credit is a floating rate based on market rates. Under the seasonal program, borrowers may obtain longer-term funds from the Discount Window during periods of seasonal need so that they can carry fewer liquid assets during the rest of the year and make more funds available for local lending.

To become eligible for seasonal credit, an institution must establish a seasonal qualification with its Reserve Bank. An institution that anticipates a possible need for seasonal credit is encouraged to contact its Reserve Bank to ascertain its eligibility and make arrangements in advance.

Making arrangements does not obligate the institution to borrow. Critically undercapitalized institutions are not eligible for seasonal credit. Undercapitalized or significantly undercapitalized institutions may be eligible, but only after careful review of their condition and prospects.

Emergency Credit In unusual and exigent circumstances, the Board of Governors may authorize a Reserve Bank to provide emergency credit to a participant in a program or facility with broad-based eligibility. Such programs and facilities must be approved by the Secretary of the Treasury, and lending Reserve Banks must obtain evidence that participants in the program or facility are unable to secure adequate credit accommodations from other banking institutions.

When not secured by U. If fewer than five but at least two Board members are available, the available members may approve an extension of emergency credit by unanimous vote, subject to the conditions set forth in section 11 r 1 of the Federal Reserve Act 3.

Interest Rates on Primary, Secondary, and Seasonal Credit By statutory requirement, each Federal Reserve Bank must establish its discount rates at least every 14 days, subject to review and determination by the Board of Governors. From October 1, , through April 7, , it established a special liquidity facility that borrowers could use without having to first seek credit elsewhere. Following the attacks on the Pentagon and World Trade Center in September , the Fed again encouraged depository institutions needing liquidity to borrow from the discount window.

During the financial crisis that began in the summer of , several adjustments were made to encourage institutions to borrow from the discount window including extending the maximum term on primary credit loans to 30 days in August and then to 90 days in March As of March , the maximum term on discount window loans has been reduced back to typically overnight.

Also, the spread between the primary credit rate and the target fed funds rate was reduced from basis points to 50 basis points in August and to 25 basis points in March In February , the spread was widened back to 50 basis points. By employing an above-market rate and restricting eligibility to generally sound institutions, the primary credit program aims to considerably reduce the need for the Federal Reserve to review the funding situations of borrowers and monitor the use of borrowed funds.

This reduced administration, in turn, strives to make the discount window a more attractive funding source for depository institutions when money markets tighten. Prior to , the discount rate's importance as a tool of monetary policy was limited because banks did little adjustment credit borrowing at the discount window.

The effectiveness of the discount window's primary credit lending program as a tool of monetary policy is assessed on an ongoing basis. Related New York Fed Content. Discount Window.

Federal Reserve Discount Window. Historical Discount Rate. By continuing to use our site, you agree to our Terms of Use and Privacy Statement. Institutions that experience and can demonstrate a clear pattern of recurring intra-yearly fluctuations in deposits and loans — caused by construction, college, farming, resort, municipal financing and other seasonal types of business — frequently qualify for the seasonal credit program.

Eligible depository institutions may qualify for term funding for up to nine months of seasonal need during the calendar year, enabling them to carry fewer liquid assets during the rest of the year and, thus, allowing them to make more funds available for local lending.

The interest rate applied to seasonal credit is a floating rate based on market rates. The initial reporting period covers loans made between July 22, and September 30, Loan data for subsequent periods will be published quarterly, with an approximately two-year lag.

The following information on discount window loans is provided for the fourth quarter of see individual Excel files for earlier definitions :. Search Submit Search Button. Toggle Dropdown Menu. Search Search Submit Button Submit. Share RSS. Transaction Data. Last Update: September 30, Each loan, data as-of the loan origination date.

Components may not sum to totals owing to rounding. August 23 through September 22, PDF. July 19 through July 28, PDF. May 17 through June 16, PDF. April 5 through April 28, PDF. February 8 through March 17, PDF. January 19 and January 27, PDF. November 16 through December 16, PDF. October 5 through November 5, PDF.

August 24 through September 16, PDF. June 22 through July 29, PDF. May 18 through June 10, PDF. February 10 through March 15, PDF. January 21 and January 29, PDF. November 4 and December 11, PDF. October 7 through October 30, PDF. August 26 and September 18, PDF.