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 above the FOMC’s target rate with minimal administrative burden on the borrower. Unless the nature of the borrowing request strongly suggests that the credit extension is not for short-term funds or does not appear consistent with the backup nature of the facility, depository institutions seeking primary credit will be asked only for the minimum information necessary to process the loan; normally they will not be asked why they are borrowing. 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.
Related Questions
- Why did the Federal Reserve change the Discount Window at the beginning of 2003? What are the major objectives of the primary and secondary credit Discount Window facilities?
- How does the Federal Reserve publish aggregate data on borrowings under the primary and secondary credit programs?
- Did the introduction of the primary and secondary credit programs have any impact on the seasonal credit program?
