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Frequently Asked Questions
NEW Paycheck Protection Program Liquidity Facility (PPPLF)
Why did the Federal Reserve establish the PPPLF?
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The Federal Reserve established the Paycheck Protection Program Liquidity Facility, or PPPLF, under section 13(3) of the Federal
Reserve Act to bolster the e ectiveness of the Small Business Administration's Paycheck Protection Program (“PPP”), which
provides relief to American workers and businesses. Under the PPPLF, the Federal Reserve will supply liquidity to participating
financial institutions through term financing backed by PPP loans.
How will the PPPLF work?
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To facilitate the extension of PPP loans to small businesses and other eligible borrowers (“PPP borrowers”), the Federal Reserve
will provide non-recourse loans to all lenders that are eligible to originate PPP loans (”PPP lenders”). PPP lenders that obtain
PPPLF extensions of credit will pledge the PPP loans as collateral to the Federal Reserve to secure the PPPLF extensions of credit.
The PPPLF will take the PPP loans as collateral at face value.
Does the PPPLF lend directly to small businesses that are eligible borrowers under the PPP?
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No.
How is the PPPLF di erent from the PPP?
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The PPP is the program administered by the Small Business Administration (SBA), under which PPP lenders make loans to
eligible small businesses and the SBA guarantees the payment of principal and interest on those loans. The PPPLF is a facility
established by the Federal Reserve to provide support for the PPP program by making non-recourse loans to PPP lenders secured
by PPP loans.
How is the PPPLF di erent from primary credit, the main discount window lending program for depository institutions?
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The PPPLF di ers from primary credit lending to depository institutions in a number of ways. The primary credit program
accepts a wide range of collateral—including PPP Loans—but the PPPLF only accepts PPP loans as collateral. The primary credit
program is open only to depository institutions, while the PPPLF is open to all eligible PPP lenders, both depository and nondepository institutions. In addition, primary credit loans are made with full recourse to the borrowing institution, while
extensions of credit under the PPPLF are non‑recourse. PPPLF extensions of credit are extended at a slightly higher rate than
primary credit loans (a fixed rate of 35 basis points rather than the current primary credit rate of 25 basis points), are for a longer
term (PPPLF loans are for two years while primary credit is available for up to 90 days), and the amount of the PPPLF extension of
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credit is determined based on the principal amount of the underlying PPP loan. For additional information on the primary credit
facility, visit: https://www.frbdiscountwindow.org/.
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How long will the PPPLF be in e ect?
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No new extensions of credit will be made under the PPPLF a er September 30, 2020, unless the Board and the Department of the
Treasury determine to extend the PPPLF.
Who is eligible to participate in the PPPLF?
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SBA-qualified PPP lenders—both depository institutions and non-depository institutions—are eligible to borrow under the
PPPLF. Before borrowing under the PPPLF, all eligible participants must complete the necessary documentation.
How does a PPP lender sign up to participate in PPPLF?
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In order to obtain an extension of credit under the PPPLF, participants must complete the necessary documentation, which varies
by type of PPPLF participant.
Depository institutions: Depository institutions must execute the PPPLF Letter of Agreement and a certification specific to section
13(3) facilities. In addition, depository institutions that have not already established access to the discount window must deliver
certified copies of the Authorizing Resolutions for Borrowers in the applicable form attached to the Federal Reserve Bank’s
Operating Circular No. 10 (OC 10).
Depository institutions are not required to establish ongoing access to the discount window to participate in the PPPLF.
However, if a depository institution desires to establish ongoing access to the discount window in addition to participating in the
PPPLF, it must submit the standard documents required by OC 10: a Letter of Agreement and a Certificate attaching copies of the
institution’s organizational documents. Please refer to the appendices to OC 10.
Non-depository institutions: Non-depository institutions must execute the PPPLF Letter of Agreement for Non-Depository
Institutions and a certification specific to section 13(3) facilities. Non‑depository institutions will agree to the terms of Federal
Reserve Bank Operating Circular No 10 (Lending) by executing the PPPLF Letter of Agreement for Non‑Depository Institutions. As
part of the PPPLF Letter of Agreement, there is a section for non-depository institutions to identify the depository institution that
will act as their correspondent (a depository institution whose account will be debited and credited for PPPLF-related payments
to and from the non-depository institution borrower). The depository institution identified as the correspondent must have a
master account at a Reserve Bank into which the proceeds of PPPLF extensions of credit are credited and from which they are
repaid. (The master account may be at any Reserve Bank.) Non-depository institutions must also deliver certified copies of the
Authorizing Resolutions for Borrowers available [here]. The set‑up process for non‑depository institutions can take up to 24
hours.
How does a PPPLF participant determine which Reserve Bank is the appropriate Reserve Bank for participating in the PPPLF?
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Depository institutions:
For depository institutions, the appropriate Reserve Bank is the Reserve Bank in whose District it is located. See Regulation D, 12
CFR 204.3(g)(1)–(2), for information on determining the District in which the depository institution is located.
Non-depository institutions: For non‑depository institutions, the appropriate Reserve Bank is as follows:
Participant Entity Type
Reserve Bank
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Non-bank Community
Federal Reserve
Email:
Development Financial
Institution (CDFI) - certified by
Bank of Cleveland
CLEV.ppplfcredit@clev.frb.org
Telephone: (888) 719-4636
Small Business Lending
Federal Reserve
Email:
Company (SBLC) - licensed and
regulated by the Small
Bank of
Minneapolis
mpls.credit@mpls.frb.org
Telephone: (877) 837-8815
Other; none of the above apply
Federal Reserve
Email: ppplfcredit@sf.frb.org
to my institution
Bank of San
Telephone: (866) 974-7475
Select Your District
the U.S. Department of the
Treasury
Business Administration
Agricultural Credit Association
(ACA) -member of the Farm
Credit System
Francisco
Can a PPPLF participant make revisions to the PPPLF letter of agreement certification, or borrowing resolution documents?
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No.
How does a PPPLF participant pledge collateral and request an advance under the PPPLF?
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A PPPLF participant must assemble all PPP loans that it intends to pledge as PPPLF collateral into separate pools grouped by
maturity date. For each such pool, the PPPLF participant must:
a. prepare a collateral transmittal form, that
i. lists the total value of the PPP loans being pledged as PPPLF collateral;
ii. contains several important certifications that the PPPLF participant must make; and
iii. contains the loan request for the total value of the PPP loans being submitted as collateral.
b. prepare a listing of the individual PPP loans that are being pledged. The information that must be included in this
individual PPP loan listing is shown in the "Paycheck Protection Program Individual Loan Reporting Table". This Loan
Reporting Table must be used as a template in preparing the individual loan listing.
The collateral transmittal form and individual loan listing must be submitted by an individual identified in the PPPLF Letter of
Agreement as authorized to request PPPLF extensions of credit and pledge PPPLF collateral. Submit the completed collateral
forms to your appropriate Federal Reserve Bank.
A separate collateral transmittal form and individual loan listing must be submitted in a separate email for each request for a
PPPLF extension of credit and pool of PPPLF collateral.
Does a PPP lender have to have a master account at a Federal Reserve Bank in order to borrow under the PPPLF?
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No. However, a PPP lender that does not have a master account must establish a correspondent relationship with a depository
institution that does have a master account with a Reserve Bank (the master account may be with any Reserve Bank and does not
have to be a master account with the lending Reserve Bank). PPPLF participants that do not already have an established
correspondent relationship must designate the depository institution that will serve as their PPPLF correspondent in the PPPLF
Letter of Agreement.
If a depository institution has an existing correspondent relationship for discount window purposes, can it establish a separate
correspondent relationship to borrow under the PPPLF?
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No. If a depository institution has an existing correspondent relationship for discount window purposes, the depository
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institution must use that same correspondent relationship for extensions of credit under the PPPLF.
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How do institutions that have completed the PPPLF documents initiate an extension of credit under the PPPLF?
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PPPLF participants obtain a PPPLF extension of credit by contacting the appropriate Reserve Bank.
At what rate will credit under the PPPLF be extended?
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PPPLF extensions of credit will be extended at 35 basis points.
Is the rate fixed for the life of a PPPLF extension of credit?
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Yes.
Are there any fees to participate in the PPPLF?
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No.
What will be the maturity of PPPLF extensions of credit?
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The maturity date of an extension of credit under the PPPLF will equal the maturity date of the PPP loans pledged to secure the
extension of credit, generally two years from origination of the PPP loan. The maturity date of a PPPLF extension of credit will be
accelerated under certain conditions. See: the FAQ below, “Can a PPPLF participant be required to repay a PPPLF extension of
credit prior to the maturity date?” In addition, if the PPP loan matures on a Saturday or a Sunday, the PPPLF extension of credit
secured by that loan will mature on the previous business day.
Is there a limit on the total amount of credit that can be extended through the PPPLF?
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No, there is no limit to the amount of credit that can be extended under the PPPLF.
Can a PPPLF participant voluntarily prepay an extension of credit under the PPPLF?
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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?
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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;
The PPPLF participant has received payment from the PPP borrower of the underlying PPP loan (to the extent of the
payment received).
Any payments on pledged PPP loans (e.g., forgiveness or guarantee payments from the SBA, or payments from the PPP borrower)
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must be promptly reported to the lending Reserve Bank so that the PPPLF extension of credit can be adjusted accordingly. For
more information on reporting payments on PPP loans and on prepayment of PPPLF extensions of credit, contact the
appropriate Reserve Bank.
Are there any penalties associated with prepayment of a PPPLF loan?
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No.
Will Reserve Banks accept PPP loans that have imaged or electronic rather than “wet ink” signatures as collateral to the PPPLF? If
so, what types of electronic signatures are acceptable?
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Yes. The Reserve Banks expect that most, if not all, PPP loans will have electronic signatures, given the conditions in which the
lending is occurring. Reserve Banks will accept PPP loans with electronic signatures (i.e., loans that are electronically originated
or loans that have electronic copies of “wet ink” signatures, such as faxed or scanned copies of “wet ink” signed documents).
Will Reserve Banks accept a letter of agreement and certification for the PPPLF that have imaged or electronic rather than “wet
ink” signatures? If so, what types of electronic signatures are acceptable?
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Yes. Reserve Banks will accept PPPLF documents with electronic signatures (i.e., images that are electronic copies of “wet ink”
signatures, such as faxed or scanned copies of “wet ink” signed documents, or electronic signatures with a digital date and time
stamp). PPPLF participants should direct any further questions regarding imaged or electronic signatures to discount window
sta at the appropriate Reserve Bank.
How are PPP loans that are pledged as collateral to the PPPLF valued?
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PPP loans pledged as collateral to secure extensions of credit under the PPPLF will be valued at the principal amount of the PPP
loan.
Will the Federal Reserve disclose information about the PPPLF?
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The Federal Reserve expects to disclose information regarding the PPPLF during the operation of the facility, including
information regarding participants, costs, revenues, and other fees.
Balance sheet items related to the PPPLF will be reported weekly, on an aggregated basis, on the H.4.1 statistical release titled
"Factors A ecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks," published by
the Federal Reserve.
In addition, the Federal Reserve will disclose to Congress information pursuant to Section 13(3) of the Federal Reserve Act, as
amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the Board’s Regulation A.
Under section 11(s) of the Federal Reserve Act, the Federal Reserve also will disclose information concerning the facility one year
a er the e ective date of the termination by the Board of the authorization of the facility. This disclosure will include names and
identifying details of each participant in the facility, the amount borrowed, the interest rate or discount paid, and information
concerning the types and amounts of collateral pledged or assets transferred in connection with participation in the facility.
PPPLF participants are required to certify that they are not insolvent and that they cannot obtain adequate credit
accommodations from other banking institutions. Upon what information may PPPLF participants rely when making these
certifications?
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Not Insolvent:
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For a PPPLF participant to comply with the requirement for certifying that it is not insolvent, the PPPLF participant may certify
that it is not (1) in bankruptcy, resolution under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or any
other Federal or State insolvency proceeding, and that it is not (2) generally failing to pay undisputed debts as they become due
during the 90 days preceding the date of borrowing under the PPPLF. This certification of non‑insolvency is required under
section 13(3) of the Federal Reserve Act and the Board’s Regulation A, which is the authority under which the PPPLF was
authorized.
Lack of Adequate Credit Accommodations:
For a PPPLF participant to comply with the requirement for certifying that it lacks adequate credit accommodations from other
banking institutions, the PPPLF participant may rely on current economic or market conditions, including conditions related to
the availability and price of credit available to small businesses in light of the COVID-19 pandemic. A PPPLF participant is not
required to certify that credit is unavailable. Rather, the PPPLF participant can rely on the fact that credit is not available at prices
or on conditions that are consistent with the purposes of the PPPLF or with normal market conditions. In particular, a PPPLF
participant may rely on the fact that the Board of Governors authorized the establishment of the PPPLF to improve the ability of
PPP lenders to obtain reasonably priced long-term financing for PPP Loans. A PPPLF participant may also rely on aspects of the
PPPLF program to determine that funding from the PPPLF is more “adequate,” including, for example, beneficial capital
treatment for PPP loans pledged to the PPPLF.
May a PPPLF participant pledge a PPP loan as PPPLF collateral that the PPPLF participant has already pledged to another party?
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No, a PPPLF participant may not pledge any PPP loan as PPPLF collateral that has been pledged to another party without
obtaining the consent of the lending Reserve Bank.
May a PPPLF participant pledge a PPP loan as PPPLF collateral if the participant funded the PPP loan using secured funding from
a warehouse lender?
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No. A participant may only pledge a PPP loan to the PPPLF if there are no other claims on that loan.
Are extensions of credit under the PPPLF made with recourse to the PPPLF participant?
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No. Extensions of credit under the PPPLF are made without recourse to the PPPLF participant. The non‑recourse status of the
PPPLF extension of credit may change, however, if 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.
For depository institutions, how are PPP loans treated for regulatory capital purposes?
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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
O ice 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.
May a PPPLF borrower pledge a PPP loan that the borrower purchased from another PPP lender as collateral for an extension of
credit under the PPPLF?
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Yes. An eligible borrower may pledge PPP loans purchased from other lenders to the PPPLF. PPP loans must be purchased in
accordance with the SBA’s requirements for the sale and purchase of whole PPP loans. An institution that pledges a purchased
PPP loan to the PPPLF must provide the Reserve Bank with documentation demonstrating that the SBA has acknowledged that
the pledging institution is the beneficiary of the SBA guarantee for the loan. This FAQ and the PPPLF program documents will be
updated at a later date to specify necessary documentation.
May a participant under the PPPLF pledge PPP loans with the same maturity date for di erent PPPLF extensions of credit?
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No. A Reserve Bank will make a single extension of credit to a PPPLF participant secured by all PPP loans submitted that mature
on a single date. For example, a PPPLF participant may have a group of PPP loans that all have a maturity date of April 30, 2022.
The Reserve Bank will make one extension of credit to that PPPLF participant secured by the pool of PPP loans having the April
30, 2022, maturity date. For this reason, a PPPLF participant should ensure that it simultaneously pledges all PPP loans with the
same maturity date. A PPPLF participant will be required to obtain a separate extension of PPPLF credit for each maturity date of
PPP loans that are pledged as collateral. The amount of the PPPLF extension of credit will be the aggregate amount of the PPP
loans that are pledged to secure that extension of credit, and the maturity date of the PPPLF extension of credit will be the
maturity date of the PPP loans that are pledged to secure it.
How soon a er submission of the PPPLF request for an extension of credit will the proceeds of the PPPLF extension of credit be
available to the PPPLF particpant?
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Proceeds of a PPPLF extension of credit will generally be available on the business day following the date of the submission of
the request. In periods of very high demand for PPPLF extensions of credit, such as is expected at the start of the facility,
additional time may be needed for proceeds to be available to the PPPLF participant.
Can a PPPLF participant obtain an extension of credit under the PPPLF before it originates the PPP loan that secures it?
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No. A PPPLF participant must first make the PPP loan that it intends to pledge as PPPLF collateral, and then submit a request for
a PPPLF extension of credit secured by that PPP loan.
Can a PPPLF participant pledge PPP loans as PPPLF collateral for an extension of PPPLF credit in an amount that is less than the
aggregate principal amount of the PPP loans that have been pledged?
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No. PPPLF credit will be extended in the amount equal to the aggregate principal amount of the PPP loans that have been
pledged.
Can a PPPLF participant pledge PPP loans to the PPPLF for the purpose of requesting an extension of credit at a later date?
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No.
Are depository institutions that are eligible for secondary credit eligible to participate in the PPPLF?
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Yes.
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?
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The PPPLF participant must both notify the lending Reserve Bank that it is requesting to prepay a PPPLF extension of credit, and
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must pay the lending Reserve Bank the full amount of the outstanding balance of the PPP Loan that the PPPLF participant wishes
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to sell into the secondary market. The PPPLF participant should contact the appropriate Reserve Bank for information on
submitting its request and on completing any necessary documentation.
Are there any restrictions on what a PPPLF participant does with the proceeds of a PPPLF extension of credit?
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No. The PPPLF provides liquidity against PPP loan collateral to bolster the e ectiveness of the PPP. There are no restrictions on
what an institution does with the proceeds of a PPPLF advance.
Do PPP lenders have to a use a promissory note provided by the SBA or may they use their own?
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PPP lenders may use their own promissory note or an SBA form of promissory note. See the SBA’s Frequently Asked Questions for
Lenders and Borrowers for the Paycheck Protection Program at: https://www.sba.gov/document/support--faq-lendersborrowers (Question: Do lenders have to use a promissory note provided by the SBA or may they use their own?")
Where should questions regarding the PPPLF be directed?
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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
Federal Reserve
Email:
Development Financial
Institution (CDFI) - certified by
Bank of Cleveland
CLEV.ppplfcredit@clev.frb.org
Telephone: (888) 719-4636
Small Business Lending
Company (SBLC) - licensed and
Federal Reserve
Bank of
Email:
mpls.credit@mpls.frb.org
regulated by the Small
Business Administration
Minneapolis
Telephone: (877) 837-8815
Other; none of the above apply
Federal Reserve
Email: ppplfcredit@sf.frb.org
to my institution
Bank of San
Francisco
Telephone: (866) 974-7475
the U.S. Department of the
Treasury
Agricultural Credit Association
(ACA) -member of the Farm
Credit System
Where is there more information about the PPP?
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To learn more about the PPP, visit https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-smallbusinesses.
When will interest on PPPLF advances accrue? When must a PPPLF participant pay accrued interest on a PPPLF advance?
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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 payo . 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
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prepayments (including payment of the accompanying accrued and unpaid interest) will be processed when the PPPLF
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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 will PPPLF participants prepay PPPLF advances when they receive payments on the PPP loans pledged to secure the PPPLF
advance?
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PPPLF participants are required to prepay a PPPLF advance upon receiving any payments on PPP loans pledged as collateral for
the advance. The amount of any PPPLF advance outstanding cannot exceed the outstanding amount of PPP loans pledged to
secure the advance.
At the time that PPP loan forgiveness payments begin to be requested and processed by the SBA, lending Reserve Banks will
begin requiring that PPPLF participants submit, at a frequency to be determined, updated aggregate outstanding balances of
each pledge pool of PPP loans securing PPPLF advances. PPPLF participants are required to prepay PPPLF advances to match
the updated aggregate collateral balance in the associated pledge pool, so that the amount of a PPPLF advance outstanding
never exceeds the aggregate amount of PPPLF collateral pledged to secure the advance. PPPLF participants must pay all accrued
and unpaid interest on the prepayment amount with such prepayments. Similar to the initial PPPLF collateral pledge and loan
request, PPPLF participants must accompany all prepayments of PPPLF advances with a transmittal form showing the aggregate
current outstanding balances of the pledged PPP loans, as well as with individual loan listings for each of the pledge pools. The
forms and additional submission instructions for prepayments of PPPLF advances will be available by mid-May.
What should PPPLF participants do to prepare for the required prepayments of their PPPLF advances?
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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.
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?
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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 o . Substitution of PPP loans that were not originally pledged is not permitted.
What should a PPPLF participant do if it receives a payment on a pledged PPP loan before late May 2020?
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If a PPPLF participant receives a paydown on a PPP loan pledged to a PPPLF advance before late May, the PPPLF participant
should submit an updated aggregate collateral balance for the a ected PPPLF advance and an updated individual loan listing for
the collateral pool using the “Transmittal Form for Pledge of Small Business Administration Paycheck Protection Program Loans
for the Paycheck Protection Program Liquidity Facility and Request for Advance” and the “Paycheck Protection Program
Individual Loan Reporting Template” forms that were used for the initial PPPLF advance request. The email transmitting the
forms should specify that the request is for a prepayment on an existing PPPLF advance, not a request for a new PPPLF advance.
The PPPLF participant is required to prepay the PPPLF advance to the extent necessary to match the remaining outstanding
amount of the PPPLF advance with the aggregate value of the pledged PPP loans in the associated pledge pool, together with
accrued and unpaid interest on the prepayment amount.
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?
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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.
Discount Window
What are the major objectives of the discount window?
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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 e ective implementation of monetary policy. By providing ready access to funding,
the discount window helps depository institutions manage their liquidity risks e iciently 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 o er 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?
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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 e ective March 16, 2020, and will remain in e ect 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?
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Feature
Primary Credit
Secondary Credit
Rate
The rate is set relative
to the FOMC's target
range for the federal
Primary credit rate plus 50 basis points*.
funds rate.
Term
Provided for periods as
Short-term, usually overnight. Can be extended for a longer term if such credit
long as 90 days.
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 Guidelines
Depository
institutions
General Information
Agreements
Depository
institutions that
do not qualifyPayment
for primary
credit.
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Risk
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in generally sound
financial condition.
Use
No restrictions. May be
used to fund sales of
As a backup source of funding on a very short-term basis, or to facilitate an
orderly resolution of serious financial di iculties.
federal funds.
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?
View
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
su icient 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?
View
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 o en is
eligibility reassessed? When are institutions notified about their eligibility?
View
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. Essentially the same 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 SOSA 1 or 2 and ROCA 1, 2, or 3) 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 SOSA 1 or 2 and ROCA 4 or 5) 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 su iciently to be deemed generally sound.
Depository institutions assigned a composite CAMELS or CAMEL rating of 5 (or SOSA 3, regardless of ROCA) 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?
View
The Federal Reserve Act requires Reserve Banks' boards of directors to establish the discount rate, subject to review and
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determination by the Board of Governors, at least every two weeks.
General Information
Does the Federal Reserve disclose the identity of institutions that borrow from the discount window?
View
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. E ective for discount window loans (primary, secondary, and seasonal credit) extended on or a er
July 21, 2010, the Federal Reserve will publicly disclose the following information, generally about two years a er 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?
View
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?
View
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 a er 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?
View
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?
View
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
ti
di
t i d
l
d ill
tb
k d if th
h
ht f
d
l
h
requesting a discount window loan and will not be asked if they have sought funds elsewhere.
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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?
View
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 a er the fact.
What procedures should a depository institution follow to borrow from the discount window?
View
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?
View
As noted in Operating Circular No. 10, loan proceeds normally are made available at the close of Fedwire (usually 6:30 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?
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View
General Information
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?
View
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?
View
Interest will be charged at the primary credit rate in e ect 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 a er the
e ective 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?
View
No.
Can a borrower prepay a term primary credit loan?
View
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?
View
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?
View
Term primary credit loans will be collateralized by the same pool of collateral as its borrowings from the discount window
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primary or seasonal credit programs. See Discount Window and PSR Collateral Margins Table at the Discount Window Margins
General Information
and Collateral Guidelines page.
Is there an additional collateralization requirement for term primary credit loans?
View
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?
View
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?
View
A borrower is required to maintain su icient 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)?
View
Term primary credit loans with a remaining maturity greater than 30 days would be outside of the liquidity coverage ratio’s 30day 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?
View
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 insu iciencies and remedies
upon the occurrence of an event of default, such as accelerating the loan should the borrower cease to qualify for primary credit
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or become insolvent. Additional information is available in the 'Notice of Availability of Term Advances and Applicable Terms
General Information
("Terms")' document.
Will the Federal Reserve release information about term primary credit loans?
View
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 FAQs
What is a daylight overdra ?
View
A daylight overdra occurs when an institution's Federal Reserve account has a negative balance at any point during the Fedwire
operating day. Daylight overdra s are also referred to as Federal Reserve's intraday credit.
May all institutions that have a Federal Reserve account incur daylight overdra s?
View
Depository institutions with regular access to the discount window may incur daylight overdra s. Institutions that have a Federal
Reserve account but do not have regular access to the Discount Window are not permitted to incur daylight overdra s. 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 overdra s in violation of the PSR policy.
Are there limits to daylight overdra s an institution can incur in its Federal Reserve account?
View
Each institution that maintains a Federal Reserve account is assigned or may establish a net debit cap ("cap"), which limits the
amount of daylight overdra s 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?
View
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" (single-day cap plus additional capacity).
How are daylight overdra s monitored?
View
The Federal Reserve uses a schedule of posting rules, identified in the PSR policy, to determine whether a daylight overdra has
occurred in an institution’s account. The daylight overdra 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 overdra activity, monitors its compliance with the PSR policy, and calculates daylight overdra charges on an ex-post
basis
What are the Federal Reserve's expectations regarding account management?
View
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
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expected to maintain procedures to manage their accounts in contingency situations and during periods of service disruptions.
Daylight overdra s that result in overnight overdra s are strongly discouraged and subject to an overnight overdra penalty fee.
General Information
What are the most recent revisions to the PSR policy?
View
The following revisions to the PSR policy, e ective July 23, 2015, are designed to enhance the e iciency of the payment system
by aligning the PSR posting rules more closely with current operations for automated clearing house (ACH) debit transactions
and commercial check transactions and strategically position the rules for future advancements in the speed of clearing and
settlement. The Federal Reserve Board amended the PSR policy to:
Move the posting time for ACH debit transactions to 8:30 AM ET from 11:00 AM ET to align with the posting of ACH credit
transactions.
Establish new posting times for commercial check credits and debits at 8:30 AM ET, 1:00 PM ET, and 5:30 PM ET.
Are institutions required to collateralize daylight overdra s?
View
Under the PSR policy, collateralization of daylight overdra s 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 overdra s. Eligible
institutions that collateralize daylight overdra s receive a zero fee for those overdra s.
What is the purpose of collateral under the PSR policy?
View
Institutions with regular access to the discount window can incur daylight overdra s and may pledge collateral voluntarily to
reduce or o set daylight overdra 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 o set the institution's daylight overdra
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 o set an institution's daylight overdra fees.
Are there separate accounts for discount window and PSR collateral at the Federal Reserve?
View
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 di erent collateral account and is not
applied to an institution's daylight overdra fee calculation.
What type of collateral is acceptable for PSR purposes?
View
Any collateral eligible to be pledged at the discount window is eligible for PSR purposes as well. A listing of the most commonly
pledged asset types can be found by clicking on the Collateral Margins Table on this site. 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 di er from those for the discount window?
View
Collateral margins are the same for collateral pledged for either PSR or discount window purposes. See the Collateral Margins
Table on this site for more information.
What steps should institutions take to ensure collateral already pledged for discount window purposes is applied toward daylight
overdra purposes?
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View
Collateral already pledged for discount window purposes, which is not securing an outstanding discount window loan, will be
automatically applied for daylight overdra s purposes.
What steps should institutions take to pledge collateral for daylight overdra purposes, if collateral is not already pledged?
View
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 overdra purposes?
View
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 [PDF; 3.4GB].
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?
View
A net debit cap applies to the total collateralized and uncollateralized daylight overdra s. 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?
View
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?
View
Collateralized intraday credit does not increase an institution's net debit cap; it simply o sets 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 overdra capacity (max cap). For more information on applying for a max cap, institutions should contact their local
Reserve Bank.
What is a max cap?
View
Maximum daylight overdra 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.
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What is a streamlined max cap procedure for eligible foreign banking organizations (FBOs)?
View
The streamlined max cap procedure o ers additional capacity more e iciently to eligible FBOs. Eligible institutions include FBOs
that are FHCs or SOSA 1-rated institutions 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 overdra s in excess of a net debit cap considered a violation of the PSR Policy?
View
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 overdra position and charges?
View
Throughout the Fedwire® day, institutions can access the Account Management Information (AMI) system to monitor their
daylight overdra positions and collateral information in real time. Ex-post, institutions can access daylight overdra 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 overdra s?
View
The Reserve Banks calculate and assess daylight overdra charges on the basis of a two-week maintenance period as follows:
A zero fee applies to collateralized daylight overdra s for institutions with regular access to the discount window,
A 50 basis point fee applies to uncollateralized daylight overdra s for institutions with regular access to the discount
window,
A 150 basis point penalty fee is assessed for daylight overdra s 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 overdra fees calculated for institutions with regular access to the discount window?
View
The Federal Reserve determines the extent to which a daylight overdra is collateralized by comparing an institution's end-ofminute daylight overdra 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 overdra for a given minute, then that
minute of overdra is considered fully collateralized and will receive a zero price. If the daylight overdra balance exceeds the
collateral available for daylight overdra purposes, the portion of the daylight overdra 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 overdra , which is assessed a 50
basis point (annual rate) fee. Daily daylight overdra 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 overdra fees, see the Overview of the Federal Reserve's
Payment System Risk Policy [PDF; 184K] or the Guide to the Federal Reserve's Payment System Risk Policy [PDF; 603K].
How are daylight
overdra fees
calculated for institutions
without regular
access to the discount
window?
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View
Institutions without regular access to the discount window are not eligible for daylight overdra s, a zero price for collateralized
daylight overdra s, or the fee waiver. Such institutions are charged a penalty fee for any daylight overdra s they do incur.
What is a fee waiver?
View
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?
View
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 and
payment system risk sta at its Reserve Bank.
How can a depository institution monitor its collateral value on an ongoing basis?
View
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 the discount window and payment system risk sta 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®.
For certain types of loans, the collateral margins table lists separate margins for "minimal risk rated" and "normal risk rated"
loans. What is the di erence between "minimal risk rated" and "normal risk rated" loans?
View
"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 and payment system risk sta at its Reserve Bank to ensure it receives
maximum collateral value for loan types for which the minimal/normal risk distinction can be made.
The collateral margins table shows the margins for loans divided into two groups: "individually deposited" and "group
deposited" loans. What is the di erence between "individually deposited" and "group deposited" loans?
View
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 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. Generally all loans should be
individually deposited with the exception of credit card receivables, which continue to be “group deposited.”
What if an institution cannot provide its pledged loan listing in a format that is supported by the ALD process?
View
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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. If approved, 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.
How does the Federal Reserve determine the collateral value for pledged loans?
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In general, the Federal Reserve seeks to value loan collateral at a fair market value estimate. Margins are applied to the Federal
Reserve's fair market value estimate and are designed to account for the risk characteristics of the pledged asset as well as the
volatility of the value of the pledged asset over an estimated liquidation period.
The Federal Reserve uses reported cash flow characteristics and proxy credit spreads to calculate a fair market value estimate for
each pledged loan. When individual loan cash flow characteristics are not available, the Federal Reserve uses general
assumptions to estimate the fair market value of the loan pool.
Margins for loan collateral are likewise based on reported cash flow characteristics. Margins are established based on the
historical volatility of risk-free rates and proxy credit spreads, measured over typical liquidation periods.
How does the Federal Reserve determine the collateral value for pledged securities?
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In general, the Federal Reserve seeks to value securities collateral at a fair market value estimate. Margins are applied to the
Federal Reserve's fair market value estimate and are designed to account for the risk characteristics of the pledged asset as well
as the volatility of the value of the pledged asset over an estimated liquidation period.
Securities are valued using prices supplied by external vendors. Securities for which a price is unavailable from Federal Reserve
external vendors will receive zero collateral value.
Margins for securities are assigned based on asset type and duration. Margins are established based on the historical price
volatility of each category, measured over typical liquidation periods.
May a depository institution pledge asset-backed commercial paper?
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Federal Reserve Banks accept investment grade commercial paper. Asset-backed commercial paper (ABCP) is viewed as a
particular type of commercial paper and thus is eligible for consideration. Reserve Bank discount window sta may request
information on the structure and/or the quality of the underlying assets in order to assign appropriate collateral value.
May a depository institution pledge subprime mortgages and other subprime consumer debt?
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The Federal Reserve Banks accept performing consumer loans. This could include subprime mortgages and other subprime
consumer debt.
May a depository institution pledge a structured debt obligation containing subprime mortgages in the underlying collateral?
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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.
Are loans that are modified to work with customers a ected by the coronavirus eligible to be pledged? What about loans that are
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modified and are signed by the customers with images of signatures or with electronically created signatures rather than “wet
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ink” signatures?
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Yes. Loans that are modified to work with customers a ected by the coronavirus are eligible to be pledged.
The “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers A ected 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.”
Regarding loan modifications, under present circumstances, each Reserve Bank has decided loans where modifications have
imaged or electronic signatures are eligible to be pledged. Contact discount window and payment system risk sta at your local
Reserve Bank for further information.
May a depository institution pledge loans with electronic signatures as collateral?
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Yes. Each Reserve Bank has decided loans with imaged or electronic signatures in lieu of “wet ink” signatures are eligible to be
pledged as collateral. Depository institutions should direct questions regarding imaged or electronic signatures to discount
window and payment system risk sta at their local Reserve Bank.
May a depository institution pledge SBA-guaranteed loans as collateral?
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Loans guaranteed by the Small Business Administration (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 guidelines. The SBA-guaranteed portions of such loans receive margins in the “US Agency Guaranteed Loans”
category of the collateral margins table. In addition, any unguaranteed portions of SBA-guaranteed loans receive margins
according to the loan type.
New ALD Collateral Requirements FAQs
Are institutions required to submit the new ALD collateral reports now?
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No. “In-scope” institutions are not required to send in the new ALD collateral reports at this time. However, these institutions are encouraged to send in
their new collateral reports prior to the May 2019 deadline to ensure they comply with Federal Reserve System requirements.
It was previously communicated that beginning in May 2019, institutions must submit the existing ALD collateral report and the new ALD collateral report
at the same frequency and on the same “as-of” date as they submit their current reports. As such, beginning in May 2019, the existing ALD collateral
report and the new ALD collateral report with the additional loan fields should contain the same set of pledged loans.
What can I expect once my institution sends in a new ALD collateral report?
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Once your institution submits a new ALD collateral report, your local Reserve Bank will contact you in the event revisions need to
be made (for instance, if formatting errors are present) or if there are questions regarding the loan fields that are provided. In
addition, your local Reserve Bank may also contact you in order to plan and perform validation work on the data within the new
ALD collateral report (i.e. request for certain pledged loan documentation).
What does my institution need to do now?
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The purpose of the November 28, 2017 communication was to let all “in-scope” institutions account for this e ort as part of their
information technology project schedule and to begin sourcing the new loan fields. The February 6, 2018 communication
provided details to institutions about creating the new loan file as well as some clarifications to loan field definitions. The May
24, 2018 communication begins the 12 month period institutions have to complete construction of the new loan file in
accordance with the requirements published on the Discount Window Website. As of May 2018, DIs will have 12 months to ensure
that they are able to provide the required loan fields. Beginning in May 2019, “in-scope” DIs must submit both their existing ALD
collateral report as well the new ALD collateral report with the additional loan fields. Those institutions that are not required to
submit any additional loan fields do not need to make any changes to their ALD collateral report submission practices.
Where can I find the list of the new required loan fields for “in-scope” institutions?
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The set of existing loan fields that are required of all DIs, along with the additional loan fields and corresponding definitions
required of "in-scope" DIs, can be found on the New Automated Loan Deposit (ALD) Collateral Requirements page. All other
institutions do not need to submit any additional loan fields. If your institution has any questions regarding loan field definitions
you can submit them here.
How should the new ALD collateral reports be formatted and transmitted to the Federal Reserve?
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Details surrounding the new format and transmission methods were published to the Discount Window website on February 6,
2018 and can be found here. “In scope” institutions that have specific questions regarding file construction can submit questions
here or contact their local reserve bank. All other institutions do not need to make any changes to their current pledged loan files
or their transmission process.
Should institutions continue to submit their existing ALD collateral reports?
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“In-scope” institutions will be required to submit both their current ALD collateral reports as well as the new ALD collateral
reports with the additional loan fields in a new format starting in May 2019. The dual file submission process is expected to last
approximately 18 months, a er which only the new ALD collateral report with the additional required fields will need to be
submitted. Those institutions that are not required to submit any additional fields do not need to make any changes to their ALD
collateral report submission practices.
If institutions have questions about the new ALD collateral report requirements, who should they contact?
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Questions about the new ALD collateral report requirements can be submitted here.
Institutions may also contact their Federal Reserve Bank's Discount Window collateral sta with any inquiries.
Is the Federal Reserve making any changes to collateral eligibility in connection with the new ALD collateral report requirements?
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No. The Federal Reserve is not making any changes to collateral eligibility in connection with the new ALD collateral report
requirements. Please refer to the Federal Reserve Collateral Guidelines for questions concerning eligibility.
Will the margins table be a ected by these changes?
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Not at this time. The existing ALD collateral report will continue to be used for valuation and margining purposes, while the new
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ALD collateral report with the additional fields will be used to test and calibrate the new margins and internal fair market value
estimates, which will be announced on a future date.
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How will collateral values be a ected for institutions that are not required to comply with the new ALD collateral reporting
requirements?
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The Federal Reserve utilizes the same internal model to derive values for all loan collateral pledged by any institution.
Institutions that are not required to comply with the new ALD collateral reporting requirements will receive collateral based on
the data provided by the “in-scope” institutions. These values, in addition to the loan data fields that are currently reported to
the Federal Reserve, will be used to assign margins and internal fair market value estimates for pledged loans. This will take
e ect once the testing and calibration of margins and internal fair market value estimates are complete.
Will new ALD collateral reports continue to be “individually deposited” and “group deposited”?
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No. In general, new ALD collateral reports for “in-scope” institutions will all be “individually deposited”. "Group deposited” loans
will be approved on a case by case basis. The set of existing loan fields that are required of all DIs can be found on the New ALD
Collateral Requirements page, while “in scope” DIs can find a detailed list of all additional loan fields with definitions here.
Institutions that are not “in-scope” will continue to pledge either “individually deposited” or “group deposited” loans as directed
by their local Federal Reserve Bank.
Where is there further information about Discount Window and Payment System Risk collateral?
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Additional information is available in the New Requirements for Automated Loan Deposit section of this website. Information is
also available from discount window sta at the Federal Reserve Banks.
Have the ALD file format specifications document changed?
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Yes. The ALD file format specifications document has been revised in order to account for clarifications to certain required loan
field definitions and formatting requirements. An updated final detailed list of the additional loan fields, along with definitions,
can be found here. This document is intended to be in its final form; however, any additional changes deemed necessary will be
communicated to institutions as soon as they are known. Changes have been highlighted in a separate document, which can be
found here.
Do these requirements apply to pledges of credit cards?
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Yes. As noted in a separate FAQ, credit card pledges are to be reported based on credit score “pools,” with each “pool” having a
set credit score threshold. Required loan fields for credit card pledges will take the form of sums or weighted averages of all
credit card accounts in a given “pool.” Separate submissions of Prime and Subprime credit cards are no longer required for inscope institutions; since credit card reporting is now “pool”-based, only one submission covering all credit cards is needed.
However, the format in which an in-scope institution will be required to deliver the new loan fields will be at the discretion of
each Federal Reserve Bank. For instance, your Federal Reserve Bank may require you to build and submit a new loan file in
accordance with the file format instructions and specifications included within this communication or may instruct you to follow
di erent file format guidance. Federal Reserve Banks will inform in-scope institutions pledging credit cards of their required
format by May 31, 2018. Please note that if your institution currently reports credit card data at the account level, your local
Federal Reserve Bank may continue to require this submission for the life of the pledge and will inform you of this requirement by
May 31, 2018.
Do these requirements apply to other loan fields that my Federal Reserve Bank requires but are not part of the new request?
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No. These requirements do not apply to other loan fields that a local Federal Reserve Bank may collect from a given institution.
Your local Federal Reserve Bank will inform you whether these loan fields will continue to be required by May 31, 2018. If so,
these loan fields can be appended to the new loan file submission (for any given loan type, this would be to the right of the last
loan field required according to the loan file specifications) in the format that is communicated by your local Federal Reserve
Bank.
What are the consequences of not submitting the required loan fields?
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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 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, there will be a subset of missing loan fields whereby a pledged loan will automatically receive zero
collateral value. This subset includes the loan fields of Balance, Interest Rate, Maturity Date, DI Internal Risk Rating, FX/FL Flag,
Interest Rate Spread, Credit Bureau Score Current (credit cards only) and APR (credit cards only). This subset may be expanded at
the discretion of the Federal Reserve System.
Please note that collateral valuation adjustments will only occur once the new ALD collateral reports are used to calculate
collateral values, which is targeted for year-end 2020. Please also note that the intent of the Federal Reserve System is for the
required loan fields to be sourced in an automated fashion. If you have concerns regarding your ability to provide the required
loan fields, please submit them here or contact your local Federal Reserve Bank as soon as possible.
Does the definition of a master note include standard lines of credit where the borrower is authorized to make multiple
advances?
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No. A master note is defined as a lending facility in which a borrower has the ability to make one or multiple draws (the
cumulative amount of which cannot exceed the master note amount) whereby each draw becomes a distinct loan with its own
unique Obligation Number, all of which being reported as separate loan detail records with distinct sets of loan field values.
Please note that, as opposed to draws under a master note, draws under a single line of credit are not to be reported as separate
pledged loans. Please refer to the revised ALD Collateral Requirements Definitions and the Highlighted Loan File
Changes documents for more information.
Are the allowable values for the Interest Rate Index loan field meant to capture both domestic and foreign indices?
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No. The allowable values are only meant to capture domestic interest rate indices. All foreign indices should be categorized as
“OT” (Other). Please refer to the revised ALD Collateral Requirements Definitions and the Highlighted Loan File
Changes documents for more information.
Are there certain loan fields that are the same as data elements required for Y-14 reporting?
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Yes. Currently, there are 13 loan fields that are the same as data elements required for Y-14 reporting, which are spread across
nine loan types. If your institution feels that this information would assist in building the new loan file, please send an e-mail to
SYS.ALD.Info@bos.frb.org and it will be made available.
Where should call report codes be sourced from and how should they be formatted on the new ALD collateral report?
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Depending on the type of institution, call report codes should be sourced from either the FFIEC 031/041 report, the NCUA call
report (Statement of Financial Condition/Schedule A) or the FFIEC 002 report. Please format call report codes without periods,
parentheses or capital letters. For example:
4a
1a1
6c
Will my institution become out-of-scope if it no longer meets the communicated definition?
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No. Once your institution has been designated as "in-scope", you will be expected to comply with the new ALD reporting
requirements going forward even if your institution does not meet one or more aspects of the "in-scope" definition in the future.
Please contact your local FRB with any questions or concerns.
Margins
Why is the Federal Reserve introducing an updated discount window and payment system risk collateral margins table?
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The Federal Reserve annually reviews its collateral margins table and models. The changes reflect analytical improvements in
the methodology and the use of updated market data. The updated collateral margins table will be e ective on July 1, 2019.
Is the Federal Reserve's updated collateral margins table a response to financial conditions or a signal that markets are improving
or deteriorating?
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No. The Federal Reserve continually conducts reviews and adjusts collateral valuation and margin practices. The updated
collateral margins table incorporates improved methodology and updated market data and is not a response to particular
financial conditions.
Will the changes negatively impact depository institutions' ability to utilize the discount window and collateralized daylight
credit?
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The impact on individual depository institutions will vary depending upon the composition of collateral pledged. The lag
between the announcement and implementation of the updated collateral margins will provide depository institutions time to
work with their Reserve Banks to pledge additional collateral if needed or desired.
Is the Federal Reserve making any changes to collateral eligibility in connection with the updated margins table?
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No. There are no changes to collateral eligibility as a result of the updated margins for 2019. Please refer to Federal Reserve
Collateral Guidelines concerning eligibility.
How can a depository institution estimate what its collateral value will be upon implementaton of the updated collateral margins
table?
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Discount window staff at each depository institution’s Federal Reserve Bank will provide this information upon request.
How can a depository institution monitor its collateral value on an ongoing basis?
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An institution can review its Statement of Collateral Holdings to determine the total value of its collateral as well as the collateral
value for security holdings and loan types. 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, 2019, these sources will reflect values calculated under the margins table
in e ect at that time.
How will a depository institution know whether it will need to pledge additional collateral due to the implementation of the
updated collateral margins table, e ective July 1, 2019?
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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 su icient in advance of the implementation date.
Where is there further information about discount window and payment system risk collateral?
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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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