Fed is encouraged by ‘notable increase’ in discount window borrowing

The nation’s central bank issued a statement Thursday that it was encouraged by the notable increase this week in discount window borrowing, “with banks demonstrating a willingness to use the discount window as a source of funding to support the flow of credit to households and businesses,” and it urged banks to continue to access this liquidity source.

The Federal Reserve Board on Sunday announced a range of actions to help encourage banks to keep lending to households and businesses amid concerns about the coronavirus (COVID-19), including a reduction in the cost of discount window borrowing to promote use of the discount window. The Fed, the Federal Deposit Insurance Corp. (FDIC), and the Office of the Comptroller of the Currency (OCC) also jointly urged more use of the window in a statement Monday.

“By providing ready access to funding, the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for their customers, such as withdrawing credit during times of market stress,” the Fed said Thursday. “The Federal Reserve welcomes continued use of the discount window by banks to help them channel credit to households and businesses.”

Discount window changes

Joint agencies statement

Federal Reserve Board encouraged by increase in discount window borrowing to support the flow of credit to households and businesses