In the latter stages of the financial crisis in 2007-2008, the Federal Reserve took some heat for not reporting who participated in discount window borrowing. Traditionally the Fed does not reveal borrowers in order to limit any stigma from doing so when prudent and necessary. While the borrowing from the discount window is from the lender of last resort – The Fed – it can be unhelpful in retrospect to publish that a firm was in trouble, however briefly. And there can be reasons for borrowing from the discount window that have to do with taking advantage of favorable rates or as was the case during the financial crisis, to demonstrate solidarity with others in need of funds and increase confidence that institutions are funded and able to meet their obligations.
This time around it looks like the Fed is taking steps to get ahead of any such criticisms. While it hasn’t announced it will reveal discount window borrowers, it has said it is going to report monthly on use of its liquidity facilities related to supporting markets and the economy during the COVID-19 pandemic. It will report:
- Names and details of participants in each facility;
- Amounts borrowed and interest rate charged; and Overall costs, revenues,
- And fees for each facility.
It appears that Chair Jerome Powell’s experience as a Governor back during the crisis is going to come in useful not only in the Fed’s roles of monetary policy and financial stability, but in transparency and communication as well.
See the Whetstone Analysis Reference Library for the most recent updates to this history of the large scale asset purchase programs and the credit facilities established by the Fed to address financial market strains.
April 23 had another announcements on temporary actions regulation and supervision relief measures for the financial sector during the present crisis to add to the others taken in March and April. Below is an update to the list published in a Whetstone Analysis comment on April 15.
Federal Reserve regulatory and supervisory decisions:
23-Apr-20 – Federal Reserve took a transparency measure and announced some of the information it would make available “regarding its programs to support the flow of credit to households and businesses and thereby foster economic recovery.” This to include monthly reports on facilities revived and created to address market strains related to the COVID-19 pandemic.
23-Apr-20 – Federal Reserve announced temporary actions “aimed at increasing the availability of intraday credit extended by Federal Reserve Banks on both a collateralized and uncollateralized basis.” The Fed adjusted administration of part II of Federal Reserve Policy on Payment System Risk (PSR policy). The Board suspended uncollateralized intraday credit limits and waived overdraft fees for eligible institutions in the primary credit program and permitted a streamlined procedure for secondary credit institutions to request collateralized intraday credit (max caps).
14-Apr-20 – Federal banking agencies to defer certain appraisals and evaluations for real estate transactions affected by COVID-19 for up to 120 days after closing of residential or commercial real estate loans.
07-Apr-20 – Interagency statement on loan modifications by financial institutions working with customers affected by coronavirus.
06-Apr-20 – Two interim final rules to provide temporary relief to community banking organizations. Two rules modify community bank leverage ratio framework.
02-Apr-20 – Agencies extended comment period for Volcker rule modifications to May 1, 2020.
01-Apr-20 – Temporary change to supplementary leverage ratio rule to ease strains in Treasury market and increase banks’ ability to provide credit.
31-Mar-20 – Effective date for Federal Reserve Board revised control framework delayed six months to reduce operational burden and allow institutions to focus on current economic conditions.
27-Mar-20 – Agencies announce two actions to support lending by allowing early adoptions of new methodology on how certain banking organizations measure counterparty credit risk derivatives contracts and an optional extension of regulatory capital transition for the new credit loss accounting standard (SA-CCR).
26-Mar-20 – Federal Reserve grants additional time to submit certain regulatory reports “in light of staffing priorities and disruptions caused by COVID-19” to financial institutions with $5 billion or less in total assets.
24-Mar-20 – “[M]onitoring and outreach to help financial institutions of all sizes”; temporarily reduce examination activities, especially for smallest banks; large banks should submit CCAR by April 6 to assist in monitoring capital management; additional time granted for resolving non-critical existing supervisory findings.
24-Mar-20 – Federal Reserve announced a six-month day in planned implementation of procedures governing provision of intraday credit to US branches and agencies of foreign banking organizations (FBOs).
24-Mar-20 – Federal Reserve provided additional information to financial instructions on how it would adjust its supervision in light of the coronavirus.
23-Mar-20 – Federal Reserve announced technical change to allow banks to continue lending even if total loss absorbing capacity (TLAC) declines.
22-Mar-20 – Agencies provide additional information to encourage financial institutions to work with borrowers affected by COVID-19 with “prudent” loan modifications.
17-Mar-20 – Agencies encourage banks to support households and businesses, and announced technical change to phase in automatic distribution restrictions gradually if a firm’s capital levels decline.
15-Mar-20 – Federal Reserve reduced reserve requirements to 0 (zero) effective March 26, 2020 to support the flow of credit.
Disclaimer: Whetstone Analysis provides commentary as a service to its subscribers. Whetstone Analysis is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained within the site. While the information contained within the site is periodically updated and every effort is made to ensure its accuracy, no guarantee is given that the information provided in this Web site is correct, complete, and up-to-date. Click here to read our full Disclaimer.