Use of the Federal Reserve’s discount window to continue supporting households and businesses in the face of the spreading coronavirus was encouraged in a statement issued Monday by all three of the federal banking agencies, essentially repeating what the Federal Reserve issued on Sunday.
The joint statement (issued by the Fed, the Federal Deposit Insurance Corp. [FDIC], and the Office of the Comptroller of the Currency [OCC]) noted that the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for customers. The discount window supports the smooth flow of credit to households and businesses, the agencies said.
Sunday, the Fed announced a series of actions aimed at bolstering credit availability to deal with the financial impact of the coronavirus pandemic. Among other things, the Fed dropped the reserve ratio requirement to 0% (effective March 26), lowered the discount window’s primary credit rate to 0.25% (down 150 basis points), and encouraged banks to use their capital and liquidity buffers to increase their extension of credit to households and businesses.