Fed moves to make primary, secondary credit more readily available amid COVID-19

The Federal Reserve Board on Thursday announced temporary actions to make intraday credit more readily available – on a collateralized and an uncollateralized basis – to financial institutions experiencing disruptions from the coronavirus (COVID-19) pandemic.

“In light of disruptions from COVID-19, depository institutions may face unanticipated intraday liquidity constraints and demands on collateral pledged to the Reserve Banks,” the Fed said in its announcement. “In response, the Board is adjusting the manner in which the Reserve Banks administer part II of the Federal Reserve Policy on Payment System Risk (PSR policy).”

Under the temporary policy changes, the Fed is:

  • suspending uncollateralized intraday credit limits (net debit caps) and waiving overdraft fees for institutions that are eligible for the primary credit program; and
  • permitting a streamlined procedure for secondary credit institutions to request collateralized intraday credit (max caps).

In relation to the above, the Fed said it is also suspending two collections of information that are used to calculate net debit caps.

The Fed Board believes these actions “will not meaningfully increase credit risk to Reserve Banks,” the central bank said. The changes will be applied immediately “upon publication in the Federal Register) and will remain in effect until Sept. 30 “unless the Board communicates otherwise prior to that date,” it said.

The Fed said it will soon release a list of frequently asked questions.

Federal Reserve Board announces temporary actions aimed at increasing the availability of intraday credit extended by Federal Reserve Banks