Pending FRB Standing Lending & Repo Facility Policy | M-002

[DonTrillions]

Category: Monetary Policy
Affected Parties: All Financial Institutions (FIs), FRB Treasury & Liquidity Divisions
Minting Required: N
Estimated Cost: N/A
Legal Basis: Federal Reserve Act (FRA) §§ 4, 5, 6, 8, 9 & 11

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1 Purpose​

This Policy establishes the FRB Standing Lending and Repurchase (Repo) Facility, a permanent mechanism through which the Federal Reserve Bank of Redmont (FRB) provides short-term liquidity to eligible Financial Institutions.
The facility allows institutions to borrow against FRB-approved collateral—primarily Treasury Bills (F-001) and Treasury Bonds (F-002)—to stabilize market liquidity and preserve payment continuity.

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2 Objectives​

• Provide an always-available source of secured liquidity for FIs.
• Prevent temporary reserve shortfalls from disrupting settlement flows.
• Support the Discount Rate (M-001) as the system’s anchor for short-term rates.
• Strengthen monetary-policy transmission and market confidence.
  

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3 Facility Structure​

Element	Specification
Type of Facility	Standing collateralized lending and repurchase agreement (repo) program
Maturity Options	Overnight (1 day), 15 days, 30 days, 60 days and 90 days
Eligible Collateral	FRB T-Bills (F-001), FRB T-Bonds (F-002), and other Board-approved instruments
Collateral Haircuts	T-Bills – 2 %; T-Bonds – 5 %; others as set by Board motion
Advance Rate	Face value × (1 – haircut)
Lending Rate	Prevailing FRB Discount Rate (M-001) + 0.25 % policy spread
Settlement	T + 0 via FRB ledger transfer
Redemption	Automatic buy-back of collateral at maturity upon repayment

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4 Eligibility and Access​

(a) Only Financial Institutions registered with the Department of Commerce and maintaining verified Reserve Accounts under Policy R-001 may participate.
(b) Each FI must execute a Standing Repo Master Agreement with the FRB before access.
(c) Collateral must be held in the FI’s FRB-ledger custody account at the time of transaction.

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5 Operational Procedures​

1. Application: FI submits repo request through the FRB Treasury Dashboard specifying amount, collateral type, and term.
2. Verification: Treasury Operations confirms collateral eligibility and reserve status.
3. Settlement: FRB credits the FI’s Reserve Account with cash and records collateral transfer.
4. Maturity: Upon term expiry, the FRB automatically debts the FI’s account for principal + interest and returns the collateral.
5. Early Repurchase: Allowed with 24-hour notice; interest is pro-rated.

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6 Liquidity and Compliance Safeguards​

• Facility usage may not reduce the FI’s Reserve Ratio below its Required Reserve Ratio (R-001 §4 (3)).
• Each transaction is funded solely from existing FRB liquidity; no minting is permitted.
• Collateral valuation is marked to market weekly by Treasury Operations.
• The Inspector-General has full audit access (FRA § 8 (10)–(13)).

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7 Rates and Adjustments​

(a) The Lending Rate shall track the Discount Rate and adjust automatically when the Discount Rate changes.
(b) The policy spread (0.25 %) may be altered by majority Board vote.
(c) During market stress, the Board may temporarily expand eligibility or lower haircuts under FRA § 9.

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8 Transparency and Reporting​

• The FRB shall publish monthly aggregated facility usage volumes, average rates, and outstanding repos (FRA § 8 (1)).
• Individual counterparty details remain confidential except to Congress and the Inspector-General.

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9 Governance and Review​

Authority: Federal Reserve Board (FRA § 5)
Voting: Majority of Sitting Members; DOC Secretary votes only to break ties.
Review Cycle: Quarterly assessment of usage and systemic impact.
Continuity: Remains in force under FRA § 11 until repealed or superseded.