Frequently Asked Questions

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Paycheck Protection Program Liquidity Facility (PPPLF)

Is the PPPLF still open?

No.  No new extensions of credit under the PPPLF have been made or will be made after the facility’s termination date of July 30, 2021. (Added 8/3/2021)

How do amendments to the PPP enacted by the Paycheck Protection Program Flexibility Act of 2020 (the PPP Flexibility Act) affect the PPPLF?

The PPP Flexibility Act amends several provisions of the PPP under the CARES Act, including an extension of the maturity of a PPP loan and an extension of the forgiveness period.  Under the PPP Flexibility Act, the maturity of PPP loans made on or after June 5, 2020, is now five years instead of two.  A PPP lender and a PPP borrower also may mutually agree to extend the maturity of an existing PPP loan from two to five years. 

As described in the PPPLF term sheet, the maturity of an extension of credit under the PPPLF will equal the maturity of the PPP loan pledged to secure the extension of credit. Accordingly, PPPLF advances may have a 5-year maturity when secured by a pledge of PPP loans also with a 5-year maturity.

Additional instructions for reporting requirements for pledged PPP loans with modified maturities are available on the PPPLF website. (Updated 9/25/2020)

 

At what rate is credit under the PPPLF extended?

PPPLF extensions of credit will be extended at 35 basis points.

Is the rate fixed for the life of a PPPLF extension of credit?

Yes.

Are there any fees to participate in the PPPLF?

No.

Can a PPPLF participant voluntarily prepay an extension of credit under the PPPLF?

Yes. Voluntary prepayments must be accompanied by withdrawals of PPPLF collateral pledged to secure the PPPLF extension of credit.  The amount of the prepayment must correspond to the total balance of the withdrawn PPP loans that have been pledged as PPPLF collateral.  Accrued interest will be charged at prepayment, based on the amount of prepayment.

Can a PPPLF participant be required to repay a PPPLF extension of credit prior to the maturity date?

Yes.  A PPPLF participant is required to repay a PPPLF extension of credit when any of the following happens:

  • The PPPLF participant has been reimbursed by the SBA for a loan forgiveness (to the extent of the forgiveness);

  • The PPPLF participant has received payment from the SBA representing exercise of the loan guarantee; or

  • The PPPLF participant has received payment from the PPP borrower of the underlying PPP loan (to the extent of the payment received).

PPPLF participants are required to repay PPPLF advances so that the outstanding amount of the PPPLF advance matches the updated aggregate collateral balance in the associated pledge pool.  The amount of a PPPLF advance outstanding must not exceed the aggregate amount of the outstanding balances of PPP loans pledged to secure the PPPLF advance. 

Any payments on pledged PPP loans (e.g., forgiveness or guarantee payments from the SBA, or payments from the PPP borrower) must be promptly reported to the lending Reserve Bank so that the PPPLF advance can be adjusted accordingly.  Additional information on reporting requirements for payments on PPP loans and on prepayment of PPPLF extensions of credit is available on the PPPLF website. (Updated 9/16/2020)


Will the Reserve Bank debit my institution’s account for an outstanding balance on the maturity date of a PPPLF advance?

Generally, yes.  Absent an event of default, the Reserve Bank plans for each participant to repay its advance when it comes due, including on the maturity date.  Pursuant to Operating Circular 10, which is part of the PPPLF Letter of Agreement, a participant agrees that its lending Reserve Bank will debit the participant’s account for repayment of obligations when they become due.  If a participant decides to default on an advance, the Reserve Bank will not debit a participant’s account for repayment of an advance on the maturity date.  Participants that intend to default should contact their lending Reserve Banks as soon as possible.

Although the Reserve Bank will not debit a participant’s designated account for repayment of an advance in default, the Reserve Bank may debit a participant’s account for payments the participant has received on a PPP loan pledged to the facility at any time.  Pursuant to the Letter of Agreement, these payments are the property of the Reserve Bank, and the participant agrees to remit them to the Reserve Bank.  These payments include forgiveness and guarantee payments from the Small Business Administration and payments made on a PPP loan by the PPP loan borrower. (Added 4/8/2022)

 

Will the Reserve Bank extend the maturity of my PPPLF advance if I am still waiting for forgiveness or guarantee payments from the Small Business Administration (SBA)? What should I do if I am waiting for a payment from the SBA?

No, the maturity of a PPPLF advance will not be extended to provide additional time for the participant to receive SBA payments.  The PPPLF Letter of Agreement requires that each advance be repaid in an aggregate amount equal to the advance plus accrued interest on the maturity date without regard to whether payment has been received on an underlying PPP loan.  Accordingly, any unpaid balance after the maturity date of an advance will be considered to be in default (Defaulted Advance).  The Reserve Bank will work with participants so that they may finish the process of receiving payments from the SBA and remitting those proceeds to the Reserve Bank once complete.

Participants that elect to default and are waiting for payments from the SBA will be required to provide evidence of their efforts to collect payments (including forgiveness or guarantee purchase payments, as applicable) from the SBA.  The participant also is required to continue servicing the PPP loans that collateralize the Defaulted Advance, as required by SBA rules.  SBA Procedural Notice 5000-812316 (July 15, 2021).  The participant will continue to be required to remit payments received on these PPP loans to the lending Reserve Bank, and the Reserve Bank may debit a participant’s account for payments the participant has received on a PPP loan pledged to the facility at any time.  See “Will the Reserve Bank debit my institution’s account for an outstanding balance on the maturity date of a PPPLF advance?” in these FAQs. (Added 4/8/2022)

 

May a participant modify the maturity of a PPPLF advance after the PPPLF advance matures?

No, a participant may not modify the maturity of a PPPLF advance after it matures.

A participant that is considering modifying the maturity of a PPPLF advance from two years to five years should do so before the advance matures.  For additional information regarding the process of modifying an advance from two years to five years, please consult the Guide for Pledging PPP Loans with Modified Maturities. (Added 6/17/2022)

 

May a participant modify the maturity of a PPP loan collateralizing a PPPLF advance without also modifying the maturity of the PPPLF advance collateralized by that loan?

No.  If a participant modifies the maturity of a PPP loan collateralizing a PPPLF advance such that the maturity date of the PPP loan no longer matches the maturity date of the PPPLF advance collateralized by that loan, then the PPPLF advance becomes recourse to the participant in the amount secured by that PPP loan.  In that case, the Reserve Bank is authorized to debit a participant’s account in an amount equal to the portion of the advance collateralized by any PPP loan whose maturity does not match the maturity of the PPPLF advance.  If the participant wishes to maintain the nonrecourse status of the PPPLF advance, the participant should consult with its lending Reserve Bank regarding any plans to modify the maturity date of a PPP loan that collateralizes a PPPLF advance. 

The Reserve Bank cannot modify the maturity dates of PPP loans pledged to secure PPPLF advances.  Modifying the maturity of PPP loans is governed by the requirements of the Small Business Administration.  (Added 6/17/2022)

 

What happens when my institution defaults on a PPPLF advance (Defaulted Advance)? What are my institution’s obligations for the advance, will interest accrue on the advance, and will any information be made public about the advance?

A participant will be required to continue servicing the PPP loans that collateralize a Defaulted Advance.  The SBA requires PPP lenders to service their PPP loans “until they are fully forgiven or paid in full or, in the event of a default or other qualifying event, until SBA purchases the guaranty.”SBA Procedural Notice 5000-812316 (July 15, 2021).  The participant also will continue to be required to remit payments received on these PPP loans to the lending Reserve Bank.  The Reserve Bank may debit a participant’s designated account for payments the participant has received on a PPP loan pledged to the facility at any time.  See “Will the Reserve Bank debit my institution’s account for an outstanding balance on the maturity date of a PPPLF advance?” in these FAQs.

Interest will continue to accrue on the Defaulted Advance at 35 basis points.  The Federal Reserve also discloses certain information about PPPLF advances monthly on its public website regardless of whether the advance is current or in default.  These disclosures include the name of participants, amounts borrowed, value of pledged collateral, maturity dates, and other information.  (Added 4/8/2022)

 

Are there any penalties associated with prepayment of a PPPLF loan?

No.

What information does the Federal Reserve disclose about the PPPLF?

The Federal Reserve publicly discloses information regarding the PPPLF, including information regarding participants, amounts borrowed, value of pledged collateral, overall costs and revenues, and other information.  Please see the Board’s May 12, 2020 press release for further information on the disclosures. 

Balance sheet items related to the PPPLF, including PPPLF credit extended, are reported weekly on an aggregated basis on the Board’s H.4.1 statistical release, “Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks.” 

 

In addition, the Federal Reserve will disclose to Congress information as required by Section 13(3) of the Federal Reserve Act and the Board’s Regulation A. ​(Updated 8/3/2021)

Were extensions of credit under the PPPLF made with recourse to the PPPLF participant?

No.  Extensions of credit under the PPPLF were made without recourse to the PPPLF participant.  If, however, the PPPLF participant has breached any of the representations, warranties, or covenants in the PPPLF documentation; or has engaged in fraud or made a misrepresentation in connection with participation in the PPPLF, the PPPLF advance becomes a recourse obligation. (Updated 8/3/2021)

What should a PPPLF participant do if it has pledged a PPP loan as collateral for a PPPLF extension of credit, but later decides that it wants to sell that PPP loan?

PPP loans that are pledged as PPPLF collateral must be withdrawn from the PPPLF before they are sold, and the portion of the PPPLF advance secured by that loan must be repaid.  The PPPLF participant must both notify the lending Reserve Bank that it is requesting to prepay a PPPLF extension of credit, and must pay the lending Reserve Bank the full amount of the outstanding balance of the PPP loan that the PPPLF participant is able to withdraw that loan from its collateral pledge.  The PPPLF participant should contact its lending Reserve Bank for information on submitting its request and on completing any necessary documentation. ​(Updated 8/3/2021)

Where should questions regarding the PPPLF be directed?

For depository institutions, questions regarding the PPPLF should be directed to the institution’s local Reserve Bank or to PPPLF@chi.frb.org.

For non-depository institutions, questions regarding the PPPLF should be directed as follows:  

Participant Entity Type

Reserve Bank

Email Address & Telephone

  • Non-bank Community Development Financial Institution (CDFI) - certified by the U.S. Department of the Treasury

Federal Reserve Bank of Cleveland

Email: Sys.PPPLF.Central.Processing.SMB@mpls.frb.org

Telephone: (855) 833-2465

  • Small Business Lending Company (SBLC) - licensed and regulated by the Small Business Administration
  • Agricultural Credit Association (ACA) -member of the Farm Credit System

Federal Reserve Bank of Minneapolis

Email: 

Sys.PPPLF.Central.Processing.SMB@mpls.frb.org

Telephone: (855) 833-2465

  • Other; none of the above apply to my institution

Federal Reserve Bank of San Francisco

Email: Sys.PPPLF.Central.Processing.SMB@mpls.frb.org

Telephone: (855) 833-2465


Where is there more information about the PPP?

When will interest on PPPLF advances accrue? When must a PPPLF participant pay accrued interest on a PPPLF advance?

Interest on a PPPLF advance accrues daily beginning when the PPPLF advance is credited to the PPPLF participant’s designated account at a Reserve Bank.  Interest accrues daily until the PPPLF advance is fully repaid.  PPPLF participants must pay all accrued and unpaid interest at the time of payoff.  In addition, a PPPLF participant must accompany any prepayments of any part of a PPPLF advance with payment of accrued and unpaid interest attributable to the amount of the prepayment.  The prepayments (including payment of the accompanying accrued and unpaid interest) will be processed when the PPPLF participant reports a change to the Reserve Bank in the balance of the PPP loans pledged to secure the PPPLF advance.   

Interest on a PPPLF advance will continue to accrue during any lag between the time that the PPPLF participant receives a payment on a PPP loan securing a PPPLF advance and the time that the PPPLF participant reports that payment to the Reserve Bank.

How is accrued interest on PPPLF advances calculated?

Interest on PPPLF advances accrues daily from the day the advance is extended.  Daily interest accruals are calculated on the basis of 365 days in a year, and are rounded to whole cents.  Interest does not compound, and accrues based only on the outstanding principal balance.  For example, the daily accrued interest on a PPPLF advance of $1 million is: round($ 1,000,000 * (.0035 / 365),2)*1 = $ 9.59.  (Added 5/20/2020)

Can a PPPLF participant obtain a statement from its lending Reserve Bank setting forth its PPPLF activity?

Yes. A participant’s lending Reserve Bank offers a “Lending Statement for PPPLF Participants” (Lending Statement) upon request. The Lending Statement provides information on the participant’s aggregate PPPLF advance activity (such as number of advances outstanding, total and outstanding advance amounts, accrued unpaid interest, and paid interest amounts) and aggregate PPPLF activity that has been paid down (such as paid principal amount). In addition, the Lending Statement includes this same information for each of the participant’s individual PPPLF advances.  

To request a Lending Statement, an authorized individual must email its lending Reserve Bank’s PPPLF mailbox with an email containing “request for lending statement” in the subject line. An authorized individual is a person identified in the PPPLF Letter of Agreement as authorized to request PPPLF extensions of credit and pledge PPPLF collateral. An email requesting a Lending Statement may not include other PPPLF-related issues. For example, an email requesting a Lending Statement may not also contain a PPPLF pledge or reduction transaction. A participant may request a Lending Statement from its lending Reserve Bank not more frequently than once per calendar month.  (Added 5/19/2021)


What should PPPLF participants do to prepare for the required prepayments of their PPPLF advances?

PPPLF participants should track all of their PPPLF advances and associated pledge pools of PPP loans separately and be prepared to report the updated aggregate current outstanding balance of the PPP loans in each pledge pool (reflecting payments on the PPP loans received from all sources).  PPPLF participants should also be prepared to generate listings of original and updated information on individual pledged PPP loans.

Must a PPPLF participant report to the Reserve Bank any PPP loan paydown amounts that it receives on PPP loans that are pledged to secure a PPPLF advance?

Yes, a PPPLF participant must submit a Paycheck Protection Program Liquidity Facility (PPPLF) Individual PPP Loan Reduction Report (reduction report) indicating the receipt of any payments on PPP loans pledged as collateral to the PPPLF immediately upon receipt of payment and must immediately remit the amount of paydowns received to the lending Reserve Bank. In addition, a PPPLF participant must begin submitting reduction reports every two weeks once the participant has received its first forgiveness reimbursement payment from the SBA as described below.

The first regular periodic reduction report is due when the PPPLF participant begins receiving forgiveness reimbursement payments from the SBA for, and begins forgiveness paydowns on, PPP loans pledged to the PPPLF. Thereafter, the PPPLF participant must submit reduction reports at least once every two weeks (or more frequently, if requested by the lending Reserve Bank) on any PPP loan pool containing a PPP loan for which the PPPLF participant has received a PPP loan paydown from any source.  If the PPPLF participant has not received a PPP loan paydown on any PPP loan in a given PPP loan pool during the reporting period, then the PPPLF participant is not required to submit a PPP loan reduction report for that pool.  If no PPP loan paydown amounts are received during a reporting period on any of the PPPLF participant’s PPP loan pools, the participant must notify the Reserve Bank by email that no PPP loan paydown amounts were received during the reporting period. (Updated 8/3/2021)

How does a PPPLF participant prepare and submit a reduction report?

A PPPLF participant reports PPP loan paydowns that it has received by submitting a Paycheck Protection Program Liquidity Facility (PPPLF) Individual PPP Loan Reduction Report (reduction report). Effective September 18, 2020, the single reduction report form replaces the two forms (Transmittal Form for Reporting Reductions of Outstanding Principal Balance of Small Business Administration Paycheck Protection Program Loans Pledged to Secure Paycheck Protection Program Liquidity Facility Advances and the Paycheck Protection Program Individual Loan Listing Table) that were used starting in May 2020.  The reduction report is used to submit the updated outstanding balance of individual PPP loans that are pledged as collateral to the PPPLF upon which payments have been received. The reduction report and additional instructions for submitting the reduction reports are available on the PPPLF website. (Added 9/16/2020)

Must a PPPLF participant prepare and submit a Paycheck Protection Program Liquidity Facility (PPPLF) Individual PPP Loan Reduction Report (reduction report) if the PPPLF participant has not received any paydowns on any PPP loans pledged to secure the PPPLF participant’s PPPLF advance?

No, a PPPLF participant is not required to prepare and submit a reduction report on a particular PPPLF advance if the PPPLF participant has not received any PPP loan paydowns on PPP loans pledged to secure that advance during the reporting period.  If the PPPLF participant has not received any PPP loan paydown amounts on any of its pledged PPP loan pools during the reporting period, the participant must send an email notifying the Reserve Bank that no PPP loan paydown amounts were received.  (Added 9/16/2020)

May a PPPLF participant that has received payments on pledged PPP loans pledge additional collateral to secure the PPPLF advance rather than prepay the PPPLF advance?

No.  The revalued pledge pool must include only those PPP loans that were included in the original pledge, less any that have been withdrawn or fully paid off.  Substitution of PPP loans that were not originally pledged is not permitted.

The PPPLF letter of agreement requires a participant to warrant, represent, and covenant that each PPP loan pledged as collateral “complies with all requirements of the PPP.” Does this requirement require the PPPLF participant to guarantee that the PPP loan borrower has complied or will comply with all SBA requirements applicable to PPP borrowers?

The PPPLF letter of agreement is not intended to impose requirements on a PPP lender related to its PPP borrower beyond the requirements imposed on PPP lenders by the SBA and U.S. Treasury.  The SBA’s Interim Final Rule (85 Fed. Reg. 20811, 20815 (Apr. 15, 2020) states that PPP lenders may rely on certifications of a borrower in order to determine eligibility of the PPP borrower and use of PPP loan proceeds, and provides that PPP lenders may rely on specified documents provided by the borrower to determine qualifying loan amount and eligibility for loan forgiveness.  See the SBA’s Interim Final Rule for further information.

If a PPPLF participant pledged a PPP loan to the PPPLF that does not meet one or more of the requirements of the PPP or of the PPPLF, or if the loan has been cancelled or is otherwise not guaranteed by the SBA, what must the participant do?

If a PPP loan that has been pledged to the PPPLF does not meet the requirements of the PPP or PPPLF, is cancelled, is awaiting SBA reinstatement, or is otherwise not guaranteed by the loan must be removed from the collateral pledge and the PPPLF advance secured by that PPP loan becomes a recourse obligation.  The PPPLF participant should immediately notify its lending Reserve Bank of the non-compliant PPP loan, and may choose to withdraw the loan from the collateral pledge and pay down the PPPLF advance to the extent of the withdrawn collateral (plus accrued interest).  Under the terms of the PPPLF, a PPPLF advance may only be secured by PPP loans that are guaranteed by the SBA and that satisfy all other conditions of the PPP and of the PPPLF (including the PPPLF Term Sheet and the PPPLF Letter of Agreement). 

 

The SBA determines whether a PPP loan satisfies the requirements of the PPP.  Questions regarding the status of PPP loans for purposes of the PPP, or questions regarding the cancellation of a loan or re-instating the SBA guarantee should be directed to the SBA.   (Updated 8/3/2021)

 

For depository institutions, how are PPP loans pledged to the PPPLF treated for regulatory capital purposes?

PPP loans pledged to the PPPLF are excluded from total leverage exposure, average total consolidated assets, advanced approaches total risk-weighted assets, and standardized total risk-weighted assets, as applicable.  On April 9, 2020, the Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation issued an interim final rule (“IFR”) to allow banking organizations to exclude from regulatory capital measures any exposures pledged as collateral for a non-recourse loan from the Federal Reserve.  Because PPPLF extensions of credit are non‑recourse, PPP loans pledged to the PPPLF qualify for exclusion under the IFR.

 

Consistent with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), all PPP loans receive a zero percent risk weight for purposes of the Federal banking agencies’ risk-based capital rules.  However, only PPP loans that are pledged to secure PPPLF extensions of credit may be excluded from leverage ratio calculations.  PPP loans that are pledged to secure primary credit funding at the discount window will not be excluded from leverage ratio calculations.

What is the capital treatment for loans that the PPPLF participant has purchased from the original PPP lender and then pledged to the PPPLF?

If the PPPLF participant is a depository institution, a PPP loan that it has purchased from another PPP lender and pledged to the PPPLF as collateral may be excluded from total leverage exposure, average total consolidated assets, advanced approaches total risk-weighted assets, and standardized risk-weighted assets, for the institution and its holding company, as applicable. (Updated 8/3/2021)

How should transactions with the PPPLF be treated under the liquidity coverage ratio (LCR) rule and the Complex Institution Liquidity Monitoring Report (FR 2052a)?

On May 5, 2020, the federal banking agencies issued an interim final rule (Liquidity Coverage Ratio Rule: Treatment of Certain Emergency Facilities) to facilitate use of the PPPLF, and to ensure that the effects of its use are consistent and predictable under the LCR rule.  The interim final rule neutralizes the effects of the LCR rule for banking organizations participating in the PPPLF.  The interim final rule also makes conforming changes to the FR 2052a reporting form.

Discount Window

What are the major objectives of the discount window?

Federal Reserve lending to depository institutions (the “discount window”) plays an important role in supporting the liquidity and stability of the banking system and the effective implementation of monetary policy.  By providing ready access to funding, the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for their customers, such as withdrawing credit during times of market stress.  Thus, the discount window supports the smooth flow of credit to households and businesses.  Providing liquidity in this way is one of the original purposes of the Federal Reserve System and other central banks around the world.

The Federal Reserve Banks offer three discount window programs to depository institutions: Primary credit is for institutions in generally sound financial condition.  Secondary credit is for depository institutions that do not qualify for primary credit. Seasonal credit is designed to assist small depository institutions in managing significant seasonal swings in their loans and deposits. Each program has its own interest rate, and all discount window loans are fully secured.

What changes has the Federal Reserve announced for the discount window?

On March 15, 2020, the Federal Reserve announced changes to the discount window.

These changes included the following:

  • Narrowing the spread of the primary credit rate relative to the general level of overnight interest rates to help encourage more active use of the window by depository institutions to meet unexpected funding needs.

  • Announcing that depository institutions may borrow from the discount window for periods as long as 90 days, prepayable and renewable by the borrower on a daily basis.

These changes were effective March 16, 2020, and will remain in effect until the Federal Reserve announces otherwise.  The press release announcing these changes is located at: https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm

What are the key features of primary credit and secondary credit?

Feature  Primary Credit  Secondary Credit 
Rate The rate is set relative to the FOMC's target range for the federal funds rate.
Primary credit rate plus 50 basis points*.
Term Provided for periods as long as 90 days. Short-term, usually overnight. Can be extended for a longer term if such credit would facilitate a timely return to reliance on market funding or an orderly resolution of a failing institution, subject to statutory requirements (FDICIA restrictions).
Eligibility Depository institutions in generally sound financial condition.
Depository institutions that do not qualify for primary credit.
Use No restrictions. May be used to fund sales of federal funds. As a backup source of funding on a very short-term basis, or to facilitate an orderly resolution of serious financial difficulties.
Administration No questions asked. Reserve Banks will collect information necessary to confirm that borrowing is consistent with the objectives of the program.

How do Reserve Banks administer the primary and secondary credit discount window programs?

Primary credit is extended to generally sound depository institutions at a rate set relative to the FOMC's target range for the federal funds rate with minimal administrative burden on the borrower. Depository institutions are not required to seek funds elsewhere before requesting a discount window loan.

Unlike primary credit, the secondary credit program is not a "minimal administration" facility. Reserve Banks will obtain sufficient information about a borrower's financial situation and reasons for borrowing to ensure that an extension of credit complies with the conditions of the program.

Are there any restrictions on the use of funds a depository institution borrows from the Federal Reserve under the primary credit program? Under the secondary credit program?

There are no restrictions on the use of primary credit. In particular, borrowers are not prohibited from using primary credit to finance sales of federal funds.

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.

How do Reserve Banks determine which financial institutions are eligible for primary credit? For secondary credit? How often is eligibility reassessed? When are institutions notified about their eligibility?

Eligibility for primary credit is limited to depository institutions that are in generally sound financial condition. Reserve Banks determine eligibility on an ongoing basis using supervisory ratings and capitalization data; supplementary information, when available, may also be used. Very similar criteria that are used to determine eligibility for daylight credit are used to determine eligibility for primary credit. Institutions that do not qualify for primary credit are eligible for secondary credit. Institutions' eligibility is reassessed as new information about their condition becomes available.

  • Depository institutions assigned a composite CAMELS or CAMEL rating of 1, 2, or 3 (or a ROCA, Combined ROCA, and/or Combined U.S. Operations composite rating of 1, 2, or 3, and the lending Reserve Bank has no significant concerns about the strength of parental support) that are at least adequately capitalized are eligible for primary credit unless supplementary information indicates that the institution is not generally sound.
  • Depository institutions assigned a composite CAMELS or CAMEL rating of 4 (or either a ROCA, Combined ROCA, and/or Combined U.S. Operations composite rating of 4 or 5, and the lending Reserve Bank has no significant concerns about the strength of parental support) are not eligible for primary credit unless an ongoing examination indicates that the institution is at least adequately capitalized and that its condition has improved sufficiently to be deemed generally sound.
  • Depository institutions assigned a composite CAMELS or CAMEL rating of 5 (or, regardless of ROCA/Combined ROCA/Combined U.S. Operations composite ratings, the lending Reserve Bank has significant concerns about the strength of parental support) or that are undercapitalized are not eligible for primary credit.

Institutions that have executed and submitted a borrowing agreement will be notified promptly if their eligibility changes.

How is the primary credit rate set?

The Federal Reserve Act requires Reserve Banks' boards of directors to establish the discount rate, subject to review and determination by the Board of Governors, at least every two weeks.

Does the Federal Reserve disclose the identity of institutions that borrow from the discount window?

Yes. In accordance with the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-203), which amended the Federal Reserve Act, the Federal Reserve has changed its practices with respect to disclosure of discount window lending information. Effective for discount window loans (primary, secondary, and seasonal credit) extended on or after July 21, 2010, the Federal Reserve will publicly disclose the following information, generally about two years after a discount window loan is extended to a depository institution:

    • The name and identifying details of the depository institution;
    • The amount borrowed by the depository institution;
    • The interest rate paid by the depository institution; and
    • Information identifying the types and amounts of collateral pledged in connection with any discount window loan. This disclosure requirement does not apply to collateral pledged by depository institutions that do not borrow.

This information is released quarterly. The relevant text in section 11(s) of the Federal Reserve Act can be found at https://www.federalreserve.gov/aboutthefed/section11.htm.


Does the Federal Reserve publish information about which depository institutions are allowed to borrow from the discount window at the primary credit rate?

The Federal Reserve does not publish information regarding institutions' current eligibility for primary or secondary credit. However, as noted in the response above, the Federal Reserve will publicly disclose, with approximately a two-year lag, the interest rate paid on discount window loans. Therefore, a borrowing institution's past eligibility to borrow at the primary credit rate may be inferred.

Does the Federal Reserve share the list of depository institutions eligible for primary and secondary credit with bank regulators? Does the Federal Reserve share information about institutions' use of the discount window with bank regulators?

The Federal Reserve will provide each federal regulator, at its request, a list showing which of the depository institutions supervised by that regulator have filed borrowing agreements and pledged collateral and thus are prepared to use the primary or secondary credit facilities. Also, as noted in the response above, the Federal Reserve will publicly disclose, with approximately a two-year lag, certain information on discount window loans extended on or after July 21, 2010.

Otherwise, the Federal Reserve does not routinely share information about institutions' borrowing with regulators. Regulators may, however, obtain information about an institution's borrowing history when they are investigating a potential supervisory problem.

How does the Federal Reserve publish aggregate data on borrowings under the primary and secondary credit programs?

Each week, the Board of Governors reports total borrowing under each lending program for the nation as a whole as well as the sum of borrowing under all programs for each Federal Reserve District.

The Federal Reserve describes the primary credit program as a 'no questions asked' program with minimum administration. What does that mean?

Under the amended Regulation A in place since the beginning of 2003, qualified depository institutions seeking primary credit ordinarily are asked to provide only the minimum amount of information necessary to process the loan. In nearly all cases, this would be limited to the amount and term of the loan. Depository institutions are not required to seek funds elsewhere before requesting a discount window loan and will not be asked if they have sought funds elsewhere.

As has always been the case, a Federal Reserve Bank has no obligation to make, increase, renew, or extend any loan or advance to any institution.

Is there any threshold for the size of a loan beyond which a Reserve Bank will ask the depository institution some questions regarding the loan?

No size limitations or thresholds exist except that the loan must be collateralized to the satisfaction of the lending Reserve Bank. Reserve Banks use judgment to decide when, if at all, a loan request is large enough to warrant asking questions at the time of the request or after the fact.

What procedures should a depository institution follow to borrow from the discount window?

A depository institution should contact its Reserve Bank using the toll free number listed below:

 

Federal Reserve Bank-District Toll-Free discount window number 
Atlanta-6 888-500-7390 
Boston-1 800-716-3773
Chicago-7 800-380-3762
Cleveland-4 888-719-4636
Dallas-4 877-682-3256
Kansas City-10 800-333-2987
Minneapolis-9 877-837-8815
New York-2 866-226-5619
Philedelphia-3 800-372-2011
Richmond-5 800-526-2036
San Francisco-12 866-974-7475
St. Louis-8 866-666-8316

Requests for loans must be made by authorized individuals per the borrowing resolution of the depository institution. Information about legal documentation required to borrow from the discount window is available on this website at https://www.frbdiscountwindow.org/pages/agreements/required-agreements or from the Reserve Banks. All discount window loans must be secured to the satisfaction of the Reserve Bank.

Institutions may request a loan at any time during the business day. Normally, loans are posted to borrowers' (or their correspondents') accounts at the close of Fedwire (see response below). Please refer to The Mechanics of Borrowing for additional information.

When are the proceeds of discount window loans made available to the borrower? When is the subsequent repayment posted?

As noted in Operating Circular No. 10, loan proceeds normally are made available at the close of Fedwire (usually 7:00 pm ET ) on the day the advance is approved by the Reserve Bank. Reserve Banks may approve requests for earlier availability. Discount window credit is extended for 24 hours, or multiples thereof. The repayment will be booked at the same time of day that the funds were made available to the borrower.

What is the purpose of the seasonal lending program? Where can I find more information about the seasonal lending program?

Under the seasonal lending program, small depository institutions with a recurring, seasonal need for funds may qualify to borrow from the discount window for up to nine months during the calendar year to meet seasonal borrowing needs of the communities they serve. Institutions with deposits of less than $500 million that experience fluctuations in deposits and loans caused by construction, college, farming, resort, municipal financing and other seasonal types of business frequently qualify for the seasonal lending program. More information about the seasonal lending program is available on the Seasonal Lending Program page of this website.

If a depository institution is in the seasonal credit program, may it use seasonal credit rather than the primary credit facility for its needs?

Yes. If an institution qualifies for and is granted a seasonal line, the institution decides when to draw on the line.

What rate is charged on term primary credit loans?

Interest will be charged at the primary credit rate in effect at the time the term primary credit loan is made. However, if the primary credit rate is changed while a term primary credit loan is still outstanding, the new rate will apply on and after the effective date of the change.

 

Interest on a term primary credit loan is due and payable to the lending Reserve Bank at maturity; or, if the borrower has prepaid all or a portion of the principal on an advance, interest is due at the time the entire principal has been repaid.

 

Interest accrues on the unpaid balance of an advance until the maturity date, at which time the remaining principal and any accrued interest will be automatically charged to the borrowing institution's reserve account or the designated correspondent's reserve account.

Does a borrower need to submit any additional agreements or forms (in addition to OC-10 and related documents) to borrow using a term primary credit loan?

No.

Can a borrower prepay a term primary credit loan?

Yes.  A borrower may prepay all or a portion of the principal of a term primary credit loan.

What steps must a borrower take to prepay a term primary credit loan?

An individual specified as an “Authorized Borrower” must call its Local Reserve Bank’s normal toll-free discount window telephone hotline.  The caller should be prepared to specify the following:

 

     Name and location (city and state) of your institution

     Borrowing institution’s name and ABA number

     Authorized Submitter(s’) Name(s), Title(s), and contact number(s)

     Amount of the prepayment being requested

     Details of the term primary credit loan

What kind of collateral is acceptable for a term primary credit loan?

Term primary credit loans will be collateralized by the same pool of collateral as its borrowings from the discount window primary or seasonal credit programs. See Discount Window and PSR Collateral Margins Tables on the Collateral Valuation page.

Is there an additional collateralization requirement for term primary credit loans?

Yes. Consistent with long-standing discount window collateral policy, additional collateral is required for loans whose remaining maturity exceeds 28 days – for these loans, borrowing only up to 75% of available collateral is permitted

What is the reason for the additional collateralization requirement for longer-term credit?

The requirement that institutions maintain additional collateral beyond that necessary to secure overnight and shorter-term primary credit is designed in part to ensure that borrowers retain some capacity to borrow under the primary credit facility to meet any unexpected short-term funding needs, and in part to protect against changes in the value of collateral and the creditworthiness of the borrower over the longer term of the loan.

 

Borrowers with term primary credit loans with remaining maturity of over 28 days are required to maintain additional collateral above the amount of such loans; however, at the discretion of the Reserve Bank, the borrower may access short-term primary credit up to the lendable value of the additional collateral. If the short-term primary credit is extended for more than two days, the borrower must within two days pledge more collateral to restore the amount associated with any outstanding loans of more than 28 days remaining maturity. If the borrower cannot pledge additional collateral, the Reserve Bank may require the borrower to pay down some or all of its outstanding loans.

What happens if the borrower cannot meet a collateralization requirement?

A borrower is required to maintain sufficient collateral to cover the term primary credit loan, as well as meet the collateralization requirement for any other loans with remaining term to maturity of more than 28 days. If the borrower, at any time while loans are outstanding, fails to meet any collateralization requirement, it will need to pledge additional collateral to cover the shortfall or pay down some or all of the outstanding loans.

How are term primary credit loans treated in the U.S. rulemaking on the “Liquidity Coverage Ratio: Liquidity Risk Measurement Standards” (79 FR 61440)?

Term primary credit loans with a remaining maturity greater than 30 days would be outside of the liquidity coverage ratio’s 30-day stress time horizon. For example, if a bank were to borrow term primary credit for 90 days, immediately upon borrowing, the bank’s reserve balances would increase. This increase in reserve balances would increase the numerator of the Liquidity Coverage Ratio (LCR). At the same time, the loan longer than 30 days would not create an outflow in the denominator of the LCR. As a result, the borrowing bank’s LCR increases. As the remaining maturity of the loan declines, the bank may choose to pre-pay the loan and request a new loan up to 90 days.

 

The Federal Reserve has introduced a change to support favorable treatment of term primary credit loans under the LCR.  Specifically, each Reserve Bank has waived its rights to require repayment on demand under with respect to term primary credit loans. These changes are described in the response below.

What does it mean that each Reserve Bank has waived its rights to require repayment on demand under with respect to term primary credit loans?

As announced on March 15, 2020, the Federal Reserve Banks have waived their rights to require repayment on demand for a term primary credit loan with a remaining maturity of more than 30 calendar days, as provided in section 5.1(a) of OC-10.  The Reserve Banks retain all other remedies under OC‑10, including but not limited to calls to cure collateral insufficiencies and remedies upon the occurrence of an event of default, such as accelerating the loan should the borrower cease to qualify for primary credit or become insolvent. Additional information is available in the 'Notice of Availability of Term Advances and Applicable Terms ("Terms")' document.

Will the Federal Reserve release information about term primary credit loans?

Yes, information on term primary credit loans will be disclosed in the same manner as overnight primary credit loans in accordance with the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. No. 111-203). 

Payment System Risk

What is a daylight overdraft?

A daylight overdraft occurs when an institution's Federal Reserve account has a negative balance at any point during the Fedwire operating day. Daylight overdrafts are also referred to as Federal Reserve's intraday credit.

May all institutions that have a Federal Reserve account incur daylight overdrafts?

Depository institutions with regular access to the discount window may incur daylight overdrafts. Institutions that have a Federal Reserve account but do not have regular access to the Discount Window are not permitted to incur daylight overdrafts. The Reserve Bank may also limit access to intraday credit for other institutions that present increased risks, such as institutions in weak financial condition or institutions incurring overdrafts in violation of the PSR policy.

Are there limits to daylight overdrafts an institution can incur in its Federal Reserve account?

Each institution that maintains a Federal Reserve account is assigned or may establish a net debit cap ("cap"), which limits the amount of daylight overdrafts that the institution may incur in its Federal Reserve account. An institution's cap category and its capital measure determine the dollar amount of its net debit cap.

What is a cap breach?

A cap breach is a negative end-of-minute balance in an institution's Federal Reserve account that exceeds its net debit cap or its "max cap" (net debit cap plus additional capacity).

How are daylight overdrafts monitored?

The Federal Reserve uses a schedule of posting rules, identified in the PSR policy, to determine whether a daylight overdraft has occurred in an institution’s account. The daylight overdraft posting rules define the time of day that debits and credits for transactions processed by the Federal Reserve will post to an institution's account. The Federal Reserve measures an institution’s daylight overdraft activity, monitors its compliance with the PSR policy, and calculates daylight overdraft charges on an ex-post basis

What are the Federal Reserve's expectations regarding account management?

The Federal Reserve expects institutions that maintain Federal Reserve accounts to monitor their account balances on an intraday basis in order to comply with the PSR policy. Institutions should be aware of the payments made from their accounts each day and know how those payments are funded. Institutions are expected to use their own systems and procedures, as well as the Federal Reserve's systems, to monitor their Federal Reserve account balance and payment activity. Institutions are also expected to maintain procedures to manage their accounts in contingency situations and during periods of service disruptions. Daylight overdrafts that result in overnight overdrafts are strongly discouraged and subject to an overnight overdraft penalty fee.

What are the most recent revisions to the PSR policy?

See the PSR policy press releases and notices for information on recent revisions to the PSR policy.

Are institutions required to collateralize daylight overdrafts?

Under the PSR policy, collateralization of daylight overdrafts by healthy depository institutions is voluntary to avoid disrupting the operation of the payment system and creating a burden for a large number of small users of daylight overdrafts. Eligible institutions that collateralize daylight overdrafts receive a zero fee for those overdrafts.

What is the purpose of collateral under the PSR policy?

Institutions with regular access to the discount window can incur daylight overdrafts and may pledge collateral voluntarily to reduce or offset daylight overdraft fees. Any collateral that an institution has pledged to its Reserve Bank that is not securing an extension of credit, such as a discount window loan, will automatically be applied to offset the institution's daylight overdraft fees.

Collateral may also be used to support a max cap or to meet a Reserve Bank's collateral requirement that may be applicable, for example, for institutions in weak financial condition. Collateral pledged to support a max cap or to support a collateral requirement will be applied to offset an institution's daylight overdraft fees.

Are there separate accounts for discount window and PSR collateral at the Federal Reserve?


All collateral pledged for discount window and PSR purposes resides in one account, called the FR collateral account. Collateral pledged to the Reserve Bank for Treasury purposes (TT&L collateral) is pledged into a different collateral account and is not applied to an institution's daylight overdraft fee calculation.

What type of collateral is acceptable for PSR purposes?

Any collateral eligible to be pledged at the discount window is eligible for PSR purposes as well. A detailed listing of acceptability criteria is available on the Collateral Eligibility page. Additionally, in-transit collateral may be pledged for PSR purposes at Reserve Bank discretion. All collateral must be acceptable to an institution's Reserve Bank.

Do collateral margins for PSR purposes differ from those for the discount window?

Collateral margins are the same for collateral pledged for either PSR or discount window purposes. See the Collateral page on this site for more information.

What steps should institutions take to ensure collateral already pledged for discount window purposes is applied toward daylight overdraft purposes?

Collateral already pledged for discount window purposes, which is not securing an outstanding discount window loan, will be automatically applied for daylight overdrafts purposes.

What steps should institutions take to pledge collateral for daylight overdraft purposes, if collateral is not already pledged?

The requirements for pledging collateral under the PSR policy are the same as those for pledging to the discount window. Institutions interested in pledging collateral for discount window or PSR purposes must complete certain legal documents (authorizing resolutions and agreements) with their Reserve Bank, specifically, Operating Circular No. 10 documents.

How can institutions monitor collateral applied for daylight overdraft purposes?

Institutions can access near-real-time collateral information in the Federal Reserve's Account Management Information (AMI) system. Through AMI's collateral service, institutions can view and download aggregate and CUSIP-level collateral activity information intra-day, and download ex-post reports. This collateral information is provided in addition to the periodic statement(s) of collateral holdings that institutions currently receive from the Collateral Management System (CMS) via email.

Additional information on AMI is available under Account Services on the Federal Reserve Bank Services Website. Additional information on accessing collateral information through AMI is available in the Account Management Guide.

If collateral information is unavailable in AMI intra-day, institutions should contact their local Reserve Bank for collateral balances.

Are there limits on intraday credit even when the credit is fully collateralized?

A net debit cap applies to the total collateralized and uncollateralized daylight overdrafts. The Federal Reserve believes that it is prudent to have limits on intraday credit even when the credit is fully collateralized. Limits or caps complement the use of collateral in risk mitigation.

How is a net debit cap calculated?

An institution's net debit cap is calculated as its cap multiple times its capital measure:

Net debit cap = cap multiple x capital measure.

Because an institution's net debit cap is a function of its capital measure, the dollar amount of the cap will vary over time as the institution's capital measure changes. An institution's cap category is normally set for one year, but the Reserve Bank will monitor the condition of all accountholders throughout the year to ensure that they remain eligible for their respective caps.

Does the amount of collateral pledged increase an institution's net debit cap?

Collateralized intraday credit does not increase an institution's net debit cap; it simply offsets the institution's fees associated with an extension of intraday credit. An institution that requires capacity that exceeds its net debit cap must apply for maximum daylight overdraft capacity (max cap). For more information on applying for a max cap, institutions should contact their local Reserve Bank.

What is a max cap?

Maximum daylight overdraft capacity or "max cap" is an institution's net debit cap plus its Federal Reserve approved collateralized capacity. Only institutions with self-assessed net debit caps are eligible to request a max cap from the Federal Reserve.

What is a streamlined max cap procedure for eligible foreign banking organizations (FBOs)?

The streamlined max cap procedure offers additional capacity more efficiently to eligible FBOs. Eligible institutions include FBOs with an FBO PSR capital category of highly capitalized and have a self-assessed net debit cap. The streamlined procedure allows eligible FBOs to request from the Reserve Banks additional capacity of up to 100 percent of worldwide capital times the self-assessed cap multiple without documenting a specific business need for additional capacity or providing a board-of-directors resolution authorizing the request for a max cap.

Are fully collateralized daylight overdrafts in excess of a net debit cap considered a violation of the PSR Policy?

The policy allows de minimis, self-assessed, and max cap institutions to fully collateralize up to two cap breaches in two consecutive reserve-maintenance periods without violating the policy.

How can institutions monitor their daylight overdraft position and charges?

Throughout the Fedwire® day, institutions can access the Account Management Information (AMI) system to monitor their daylight overdraft positions and collateral information in real time. Ex-post, institutions can access daylight overdraft and charge reports, including collateral information, via AMI and FedLine Direct®.

"FedLine Direct" and "Fedwire" are trademarks or service marks of the Federal Reserve Banks. A complete list of trademarks owned by the Federal Reserve Banks is available at http://www.frbservices.org/.

How are institutions charged for daylight overdrafts?

The Reserve Banks calculate and assess daylight overdraft charges on the basis of a two-week maintenance period as follows:

  • A zero fee applies to collateralized daylight overdrafts for institutions with regular access to the discount window,
  • A 50 basis point fee applies to uncollateralized daylight overdrafts for institutions with regular access to the discount window,
  • A 150 basis point penalty fee is assessed for daylight overdrafts incurred by institutions that do not have regular access to the discount window and therefore are subject to a penalty fee, and
  • A fee waiver of $150 is subtracted from the gross fees of institutions with regular access to the discount window.

How are daylight overdraft fees calculated for institutions with regular access to the discount window?

The Federal Reserve determines the extent to which a daylight overdraft is collateralized by comparing an institution's end-of-minute daylight overdraft balance to the value of FR collateral pledged by the institution (less outstanding extensions of credit) at that minute. If the value of the institution's FR collateral meets or exceeds its daylight overdraft for a given minute, then that minute of overdraft is considered fully collateralized and will receive a zero price. If the daylight overdraft balance exceeds the collateral available for daylight overdraft purposes, the portion of the daylight overdraft that is uncollateralized is included in the calculation of the institution's fees.

In calculating an institution's fees, the value of collateral in the FR account (less outstanding extensions of credit) is subtracted from all negative end-of-minute account balances to determine the institution's uncollateralized negative end-of-minute balances. The uncollateralized negative end-of-minute account balances are summed and divided by the number of minutes in the Fedwire funds transfer operating day to arrive at the daily average uncollateralized daylight overdraft, which is assessed a 50 basis point (annual rate) fee. Daily daylight overdraft fees for each reserve maintenance period are added together and reduced by the amount of the fee waiver ($150).

For more information on how the Federal Reserve calculates daylight overdraft fees, see the Overview of the Federal Reserve's Payment System Risk Policy or the

Guide to the Federal Reserve's Payment System Risk Policy found on the Payment System Risk - Related policy documents page.

How are daylight overdraft fees calculated for institutions without regular access to the discount window?

Institutions without regular access to the discount window are not eligible for daylight overdrafts, a zero price for collateralized daylight overdrafts, or the fee waiver. Such institutions are charged a penalty fee for any daylight overdrafts they do incur.

What is a fee waiver?

The fee waiver aims to reduce the burden of the PSR policy on institutions that use small amounts of intraday credit. The amount of the fee waiver is $150 per institution, per reserve maintenance period. Institutions that incur fees under $150 in a reserve maintenance period are not assessed any fees. Institutions that incur fees over $150 in a reserve-maintenance-period have their gross fees reduced by $150. The fee waiver is not available for institutions without regular access to the discount window. The waiver does not result in refunds or credits to an institution.

Collateral

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 and which meet specified eligibility criteria. A detailed listing of acceptability criteria is available on the Collateral Eligibility page. Depository institutions should direct questions regarding specific assets to discount window and payment system risk staff at its local Reserve Bank. (Updated 8/1/2022)

How can a depository institution monitor its collateral value on an ongoing basis?

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 can contact its local 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®.
 

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?

A minimal risk rating is roughly equivalent to investment grade while a normal risk rating is roughly equivalent to below investment grade (the loan must still qualify as a ‘pass credit’ from a regulatory standpoint). The minimal/normal risk distinction is available for agricultural loans, bank loans to state and local governments, commercial and industrial loans & leases, commercial real estate loans, construction loans, raw land loans and the non-guaranteed portion of U.S. agency loans. An institution can contact its local Reserve Bank to ensure it receives maximum collateral value for loan types for which the minimal/normal risk distinction can be made. (Updated 12/14/2021)

There are different reporting requirements for in-scope and out-of-scope institutions. How do I know if my institution is in-scope or out-of-scope?

In-scope institutions are those that meet the following definition:

  • All depository institutions (12 CFR 201.2(c)(1)) that are controlled (12 CFR 225.2(e)) by a Bank Holding Company (12 CFR 225.2(c)(1)) (including a Financial Holding Company (12 CFR 225.81)) or an Intermediate Holding Company (12 CFR 252.2(y)) with Fifty Billion Dollars ($50,000,000,000) or more in total consolidated assets, defined as the average over the last four calendar quarters;
  • All Foreign Banking Organizations (12 CFR 211.21(o));
  • All other domestic depository institutions with Fifty Billion Dollars ($50,000,000,000) or more in total consolidated assets, defined as the average over the last four calendar quarters; or
  • An institution that voluntarily becomes an in-scope institution.

Once an institution is defined as in-scope, the reporting requirements remain in place even if the institution no longer meets the above definition in the future. Staff at the local Reserve Bank will contact an institution if its reporting requirements are subject to change.​(Updated 8/1/2022)

How should the collateral reports be formatted and transmitted to the Federal Reserve for different loan types?

Details on the format and transmission methods for in-scope and out-of-scope institutions can be found on the Pledging Collateral page.

Where can I find the list of the loan fields required to pledge loan collateral and their definitions?

The set of existing loan fields that are required of all institutions (both in-scope and out-of-scope), along with the additional loan fields and corresponding definitions required of in-scope institutions, can be found on the Pledging Collateral page. Out-of-scope institutions do not need to submit any additional loan fields. 

If an institution has any questions regarding loan field definitions, it can contact its local Reserve Bank. (Updated 12/14/2021)

Where can I find a list of acceptable interest rate indices for pledged collateral?

The acceptable interest rate indices have been expanded to account for additional selections. Additional information on specific interest rate indices and other loan data elements can be found in the In-scope File Format Specifications and Definitions document. (Added 8/1/2022)

What are the consequences of not submitting the required loan fields for in-scope institutions?

All loan fields displayed within the ALD collateral report format specifications document are required. Collateral valuation adjustments may be applied to pledged loans that are missing required loan fields. These adjustments may include the following:
    a. Application of a default value to a missing loan field. Default values are designed to be fair, non-penalizing values based upon the data provided by other in-scope institutions;
    b. Assignment of zero collateral value to the impacted loans; or
    c. Other collateral value adjustments as deemed warranted.

Notwithstanding the above, missing information in certain loan fields will result in a pledged loan automatically receiving zero collateral value. This includes missing information for fields of Balance, Interest Rate, Maturity Date, Internal Risk Rating, FX/FL Flag, Interest Rate Spread, Credit Bureau Score Current (credit cards only) and APR (credit cards only). This list of fields is non-exclusive and may be expanded at the discretion of the Reserve Banks. Please contact your local Reserve Bank for additional information on missing loan fields.

How will collateral values be affected for out-of-scope institutions?

The Federal Reserve utilizes the same internal model to derive values for all loan collateral pledged by any institution. Out-of-scope institutions will receive collateral value based on the loan data fields currently reported to the Reserve Banks and, for the additional loan fields that are not reported, based on the non-penalizing default values generated from data provided by in-scope institutions. (Updated 8/1/2022)

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 its local Reserve Bank. If approved, the institution will be asked to provide additional summary information on pledged loans. In these circumstances, an internally modeled fair market value estimate and margin are applied to the loan pool, based on the extent of the institution's ability to provide the requested additional summary information.

May a depository institution pledge subprime mortgages and other subprime consumer debt?

The Reserve Banks accept performing consumer loans. This could include subprime mortgages and other subprime consumer debt. Reference the Collateral Eligibility page for additional information. (Updated 12/14/21)

May a depository institution pledge a structured debt obligation containing subprime mortgages in the underlying collateral?

Debt obligations containing subprime mortgages are acceptable as collateral if they meet Reserve Bank acceptability requirements, including credit quality and tranche type. AAA-rated collateralized debt and mortgage obligations are examples of acceptable structured debt obligations. Reference the Collateral Eligibility page for additional information. (Updated 12/14/21)

Are loans that are modified as a result of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) eligible to be pledged? What about loans that are modified and are signed by a customer with images of signatures or with electronically created signatures rather than “wet ink” signatures?

Yes. Loans that are modified to work with customers affected by the CARES Act are eligible to be pledged as long as they meet the other eligibility criteria described in the Collateral Eligibility page. 

The “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus,” published March 22, 2020, provided the following guidance: 
"Institutions are reminded that loans that have been restructured as described under this statement will continue to be eligible as collateral at the FRB’s discount window based on the usual criteria."
 
With respect to loans that have been modified, under present circumstances, each Reserve Bank has decided that loan modifications that contain imaged or electronically created signatures (rather than "wet ink" signatures) are eligible to be pledged. Contact your local Reserve Bank for further information.

May a depository institution pledge loans with electronic signatures as collateral?

Yes. Each Reserve Bank has decided that loans with imaged or electronic signatures in lieu of “wet ink” signatures are eligible to be pledged as collateral. Contact your local Reserve Bank for further information.

When is a modification of a loan deemed a new origination?

A modification of a loan is deemed to be a new origination if the modification was not permitted per the terms of the original loan documents.  A modification may include, but is not limited to, changes to the following loan data elements:  collateral type, interest rate, maturity date, origination date, original balance / commitment. In general, modifications will require your institution to report updated values for all relevant loan data elements as of the modification date (e.g. the modification date would be the new Origination Date). Please review the In-scope File Format Specifications and Definitions document or contact your local Reserve Bank for additional details.  (Added 8/1/2022)

May a depository institution pledge Small Business Administration (SBA)-guaranteed loans as collateral?

Loans guaranteed by the SBA—including Paycheck Protection Program (PPP) loans authorized in the “Coronavirus Aid, Relief, and Economic Security Act” or “CARES Act” of 2020—may be pledged as collateral, as described in the Collateral Eligibility page. The SBA-guaranteed portions of such loans receive margins in the “U.S. Agency Guaranteed Loans” category of the collateral margins table found on the Collateral Valuation page. In addition, any unguaranteed portion of an SBA-guaranteed loan may be pledged according to its Call Report line item or may be pledged as documented in the applicable file specification details document. (Updated 12/14/2021)

Who can I contact with additional questions?

Institutions may contact their local Reserve Bank with any inquiries.

Margins

Why are the Reserve Banks introducing updated discount window and payment system risk collateral margins tables?

The Reserve Banks annually review the collateral margins tables and models.  The changes reflect analytical improvements in the methodology, the use of updated market data and incorporation of data supplied as part of the new Automated Loan Deposit (ALD) collateral requirements.  The updated collateral margins tables will be effective on March 14, 2022. (Updated 12/14/2021)

Are the Reserve Banks' updated collateral margins tables a response to financial conditions or a signal that markets are improving or deteriorating?

No. The Reserve Banks continually review and adjust collateral valuation and margin practices. The updated collateral margins tables incorporate improved methodology and updated market data and are not a response to particular financial conditions.

Will the changes negatively impact depository institutions' ability to utilize the discount window and collateralized daylight credit?

The impact on individual depository institutions will vary depending upon the composition of collateral pledged. The lag between the announcement on December 14, 2021 and implementation on March 14, 2022 of the updated collateral margins will provide depository institutions time to work with their local Reserve Bank to pledge additional collateral if needed or desired.

Are the Reserve Banks making any changes to collateral eligibility in connection with the updated margins tables?

No. There are no changes to collateral eligibility as a result of the updated margins for 2022. Please refer to the Collateral Eligibility page for additional information. (Updated 12/14/2021) 

How can a depository institution estimate what its collateral value will be upon implementation of the updated collateral margins tables?

Staff at each local Reserve Bank will provide this information upon request. 

 

How will a depository institution know whether it will need to pledge additional collateral due to the implementation of the updated collateral margins tables, effective March 14, 2022?

The Reserve Banks have 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 tables. The Reserve Banks will notify depository institutions whose pledged collateral would not be sufficient in advance of the implementation date. (Updated 12/14/2021)