The Federal Reserve Banks accept a broad range of assets as discount window collateral. Extensions of credit must be collateralized to the satisfaction of the local Reserve Bank.

The answers indicated below are intended to provide general guidance; however, depository institutions are encouraged to raise any specific questions with their Reserve Bank's discount window staff.

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1. What collateral is acceptable to pledge for discount window or PSR purposes?
   
   
   The Federal Reserve Banks will consider accepting as discount window or PSR collateral any assets that meet regulatory standards for sound asset quality. A detailed listing of acceptability criteria is available in The Federal Reserve System's Collateral Guidelines [PDF; 193K]. Depository institutions should direct questions regarding specific assets to discount window staff.
2. How can a depository institution monitor its collateral value on an ongoing basis?
   
   
   An institution can review its collateral statements to determine the total value of its collateral as well as the collateral value for individual assets. An institution can contact the discount window staff at its Reserve Bank to sign up for electronic delivery of its collateral statements. Collateral information is also available in Account Management Information (AMI), FedLine Advantage®, and FedLine Direct®.
3. How does the Federal Reserve determine collateral value for pledged securities?
   
   
   Securities are typically valued using prices supplied by external vendors. The published margin is applied to the vendor price to determine the collateral value. Securities for which a vendor price is not available will be assigned an estimated value when the Federal Reserve can reasonably estimate a value from market information using internal valuation models. The lowest margin for that asset type will be applied.
4. For certain types of loans, the collateral margins table lists separate margins for "minimal risk rated" and "normal risk rated" loans. What is the difference between "minimal risk rated" and "normal risk rated" loans?
   
   
   "Minimal risk rated" loans have credit risk levels that are similar to investment grade bonds. "Normal risk rated" loans have credit risk levels that are similar to below investment grade bonds while remaining "pass" credits from a regulatory standpoint. The minimal/normal risk distinction is available for agricultural, commercial, commercial real estate, construction, and raw land loans. An institution can contact the discount window staff at its Reserve Bank to ensure it receives maximum collateral value for loan types for which the minimal/normal risk distinction can be made.
5. The collateral margins table shows the margins for loans divided into two groups: "individually deposited" and "group deposited" loans. What is the difference between "individually deposited" and "group deposited" loans?
   
   
   These terms refer to the way the Federal Reserve Banks maintain information about pledged loans in their Collateral Management System (CMS). Loans that are recorded individually into CMS are considered "individually deposited." Loans are individually deposited if they are pledged through the Automated Loan Deposit process. Loans held in the custody of a Federal Reserve Bank and pledges of small pools of loans may also be entered into CMS individually. All other loan pledges are recorded into CMS as groups and are thus considered "group deposited." On July 30th, 2012, the Federal Reserve announced the phase-in of a requirement that all loans be “individually deposited." [PDF; 68K]
6. What if an institution cannot provide its pledged loan listing in a format that is supported by the ALD process?
   
   
   If an institution is unable to provide its pledged loan listing in a file format that is compatible with the ALD process, an exception may be made upon approval by the Reserve Bank. In these cases, the institution will be asked to provide additional summary information on pledged loans. In these circumstances, the Federal Reserve calculates an internally modeled fair market value estimate and applies a margin to the loan pool, based on the extent of the institution's ability to provide the requested additional summary information.
7. How does the Federal Reserve determine the collateral value for pledged loans?
   
   
   The collateral value of pledged loans depends, in part, on the manner in which the loans are pledged:
   
   For loans that are pledged through the Federal Reserve's Automated Loan Deposit process (ALD), or "individually deposited loans," the Federal Reserve calculates an internally modeled fair market value estimate for each pledged loan, based on loan-specific characteristics. The margin published on the Discount Window and PSR collateral margins table [MS Excel; 80K] is applied to the Federal Reserve's internally modeled fair market value estimate for each loan, based on its type, coupon, and time to maturity, to determine collateral value.
   
   For loans that are pledged through alternative means ("group deposited loans"), the margin published on the collateral margins table is applied to the Federal Reserve's internally modeled fair market value estimate of a typical loan pool for each loan type. Please note, on July 30, 2012, the Federal Reserve announced the phase-in of a requirement [PDF; 68K] that all loans be submitted in a format supported by the ALD process, thereby phasing out the group deposit pledge option.
8. Why are individually deposited loan margins presented as ranges rather than discrete values on the collateral margins table?
   
   
   The margin applied to an individually deposited loan's internally modeled fair market value estimate depends upon the type, coupon, and time to maturity of the loan. The margins for particular coupon-maturity combinations can be viewed by clicking on the margin range in the collateral margins table [MS Excel; 80K].
9. Is senior unsecured debt issued under the NCUA's Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP) eligible to pledge for discount window or payment system risk collateral purposes?
   
   
   Yes. Senior unsecured debt issued under the NCUA's Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP) may be pledged for discount window or payment system risk purposes.
10. May a depository institution pledge asset-backed commercial paper?
    
    
    Federal Reserve Banks accept investment grade commercial paper. Asset-backed commercial paper is viewed as a particular type of commercial paper and thus is eligible for consideration. Reserve Bank discount window staff may request information on the structure and/or the quality of the underlying assets in order to assign appropriate collateral value.
11. May a depository institution pledge sub-prime mortgages?
    
    
    The Federal Reserve Banks accept performing mortgages.  This could include sub-prime mortgages.
12. May a depository institution pledge a structured debt obligation containing sub-prime mortgages in the underlying collateral?
    
    
    Debt obligations containing subprime mortgages are acceptable as collateral if they meet Federal Reserve Bank acceptability requirements, including credit quality and tranche type. AAA-rated collateralized debt and mortgage obligations are examples of acceptable structured debt obligations.