Acceptance Criteria for Securities

Securities pledged to Reserve Banks must meet the following criteria:

1. A pledging institution must have rights in the securities that are sufficient to grant an enforceable security interest to the Reserve Bank. The Reserve Bank must be able to obtain a perfected, first priority security interest in the securities, free of the adverse claims of third parties, including the claims of an insolvency official or an affiliate of the pledging institution.
2. Securities should not be subject to any regulatory or other constraint(s) that impair their liquidation.
3. Securities may not be obligations of the pledging institution or an affiliate of the pledging institution, or otherwise correlated with the financial condition of the pledging institution.
4. In general, securities must meet the regulatory definition of “investment grade” at a minimum, and in some cases must be of "AAA" rating quality (where indicated). If a security has more than one credit rating assigned, the most conservative (lowest) rating will be utilized.
5. Intermediated securities must be pledged to the local Reserve Bank’s account at Depository Trust Company (DTC), Euroclear, or Clearstream, or the pledging institution’s restricted securities account at the Fedwire Securities Service (FSS). Certificated securities must be held at a custodian approved by the Reserve Bank or at the Reserve Bank.
6. Securities denominated in certain foreign currencies are acceptable. Eligible foreign currencies are: Japanese yen, euro, Australian dollars, Canadian dollars, British pounds, Danish krone, Swiss francs, and Swedish krona (Eligible Foreign Currencies).

Asset Eligibility Table

Acceptance Criteria for Loans

Loans pledged to Reserve Banks must be in US dollars governed by US law and meet the criteria listed below. For a list of Reserve Bank loan collateral categories by call report code, see the Loan Types and Call Report Mapping Table on the Pledging Collateral page.

Acceptance Criteria for Individual Loans

1. The following loans are generally accepted if not more than 30 days past due: commercial and industrial loans; agricultural production loans; agricultural loans secured by farmland; commercial real estate loans (nonfarm nonresidential); owner occupied nonfarm nonresidential commercial real estate; 5+ family residential mortgage loans; construction loans (1-4 family, construction, and other construction loans); raw land loans (land development and other land loans); U.S. agency loans, and obligations of states and political subdivisions (municipalities).
2. The following loans are generally accepted if not more than 60 days past due: consumer loans (both secured and unsecured); 1-4 family mortgage loans (second lien, home equity); 1-4 family residential mortgage loans; student loans; and credit card receivables.
3. The pledging institution must have rights in the loans that are sufficient to grant an enforceable security interest to the Reserve Bank. The Reserve Bank must be able to obtain a perfected, first priority security interest in the loans, free of the adverse claims of third parties, including the claims of an insolvency official bankruptcy trustee, or an affiliate or subsidiary of the pledging institution.
4. Loans cannot be subject to any regulatory or other constraint(s) that impairs their liquidation, including, but not limited to, environmental law or other forms of lender liability.
5. Loans must be in readily negotiable, transferable or assignable form (i.e., loans should not be subject to restrictions on assignments or transfer, such as provisions requiring consent to an assignment or transfer). Domestic syndicated loans and loan participations that contain assignability restrictions are acceptable if they contain a provision explicitly allowing the pledging institution to pledge the loan(s) to a Reserve Bank.
6. Loans must be payable to the pledging institution, unless an alternative arrangement is approved by the Reserve Bank.
7. Loans may not be obligations of the pledging institution or otherwise correlated with the financial condition of the pledging institution.
8. Generally, notes originated and signed in paper form, note amendments/assignments, and other required loan documentation must be stored on the pledging institution’s premises pursuant to a pre-approved Borrower-in-Custody (BIC) arrangement or at a Reserve Bank, unless an alternative arrangement is approved by the Reserve Bank. Exception: Participations may be copies if the pledging institution is not the lead bank.
9. Loans signed with digital signatures and stored electronically, and loans signed on paper and then imaged and stored electronically with the original paper copy destroyed may be pledged as collateral. Some restrictions may apply based on the applicable state law; contact your local Reserve Bank with any questions on this topic.
10. Loans must be pledged at the note level (e.g., if a drawdown under a master note is pledged, the master note itself must also be pledged). The maturity dates and outstanding balances of all drawdowns may not exceed the maturity date and current face amount of a pledged master note.
11. Loan participations are generally eligible for pledge but must be clearly structured as purchase-sale transactions. The eligibility criteria for pledged loans also apply to loans underlying pledged loan participations and/or to the pledged participations, as the case may be.
12. Loans secured by the stock or credit of the pledging institution or an affiliate are only acceptable in limited circumstances and with the approval of the local Reserve Bank.
13. Loans to foreign obligors are only acceptable in limited circumstances and with the prior written approval of the local Reserve Bank (see below).
14. Loans with any of the following characteristics are not acceptable:
    1. Loans classified as Special Mention, Substandard, Doubtful or Loss, or that are otherwise deemed unacceptable by the Reserve Bank following a review of the pledging institution’s internal risk rating policy;
    2. Loans to insiders, including loans to directors, officers or principal shareholders; and
    3. Loans to an affiliate, subsidiary or parent of the pledging institution (which may include loans to non-depository institutions, such as insurance companies and brokerages).

Loans to Foreign Obligors Pledged as Collateral

Generally, Reserve Banks do not accept foreign obligor loans as collateral except in limited circumstances. Depository institutions wishing to pledge foreign obligor loans should contact their local Reserve Bank to determine whether it accepts foreign obligor loans as collateral and if so, under what conditions.