Frequently Asked Questions

The New Discount Window & Payment System Risk Collateral Margins Table, Effective July 1, 2014

Last Updated: 6/3/2014

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  1. The Federal Reserve periodically reviews its collateral margins table and models. The changes reflect analytical improvements in the methodology and the use of updated market data. The new collateral margins table will be effective on July 1, 2014.
  2. No. The changes to the collateral margins table are the result of a multi-year review of valuation by Federal Reserve credit risk management staff. The Federal Reserve continually conducts reviews and adjusts collateral valuation and margin practices. The new collateral margins table incorporates improved methodology and updated market data and is not a response to particular financial conditions.
  3. The impact on individual depository institutions will vary depending upon the composition of collateral pledged. The lag between the announcement and implementation of the new collateral margins will provide depository institutions time to work with their Reserve Banks to pledge additional collateral if needed or desired.
  4. No. The Federal Reserve is not making any changes to collateral eligibility in connection with the new margins table, but the collateral categories listed in the collateral margins table have been updated. The line item for GSE stock has been removed, but this asset type remains eligible, subject to the eligibility requirements detailed in the Federal Reserve System's Collateral Guidelines [PDF; 193K]. The line item for covered bonds has been consolidated into the corporate bonds category.
  5. "Minimal risk rated" loans have credit risk levels that are similar to investment grade debt. "Normal risk rated" loans are considered to have credit risk levels that are similar to below investment grade debt 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. Depository institutions can contact their Federal Reserve Bank to ensure they receive maximum collateral value for loan types for which the minimal/normal risk distinction can be made.
  6. These terms refer to the way the Federal Reserve Banks receive and 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 (ALD) process. The Federal Reserve previously announced that all pledged loans must be submitted in an ALD-supported format by December 31, 2014, with the exception of student loans and credit card receivables. Certain loans held in the custody of a Federal Reserve Bank are also entered into CMS individually. All other loan pledges are recorded into CMS as groups and are thus considered "group deposited."
  7. The Federal Reserve previously announced that all pledged loans must be submitted in an ALD-supported format by December 31, 2014, with the exception of student loans and credit card receivables. Group deposited loan margins will no longer be published for loan types that must be pledged as individually deposited loans.
  8. The Federal Reserve continually conducts reviews and adjusts collateral valuation and margin practices. The introduction of separate margins for fixed-rate and floating-rate loans represents an improvement in the granularity of the Federal Reserve's valuation approach.
  9. As previously announced, depository institutions with total assets of $10 billion or more, as well as all foreign banking organizations, regardless of size, are required to report whether each loan in their pledged loan listing(s) has a fixed or floating interest rate. Reporting this information is optional for other institutions. When this information is not reported for a particular loan, the Federal Reserve will assign the lower of the fixed-rate and floating-rate collateral valuations.
  10. Discount window staff at each depository institution's Federal Reserve Bank will provide estimates upon request.
  11. An institution can review its Statement of Collateral Holdings to determine the total value of its collateral as well as the collateral value for individual assets. An institution should contact its Federal Reserve Bank to sign up for electronic delivery of its Statement of Collateral Holdings. Institutions that use Account Management Information (AMI) may also view their collateral value through that application. Note that prior to July 1, 2014, these sources will reflect values calculated under the margins table in effect at that time.
  12. The Federal Reserve has already begun analyzing all depository institutions' current discount window borrowings and payment system risk collateral requirements relative to their collateral values under the new collateral margins table. The Federal Reserve Banks will notify depository institutions whose pledged collateral would not be sufficient in advance of the implementation date.
  13. Additional information is available in the collateral section of this website. Information is also available from discount window staff at the Federal Reserve Banks.

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