Pending FRB Treasury Bill Policy | F-001

[DonTrillions]

Category: Fiscal Policy
Affected Parties: Financial Institutions, FRB Operations Division
Minting Required: N
Estimated Cost: N/A
Legal Basis: Federal Reserve Act (FRA) §§ 4, 5, 6, 8, 9, 11 & 13

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1. Purpose​

In alignment with the continuing development of Redmont’s financial system, the Federal Reserve Bank introduces the Treasury Bill Program (“FRB T-Bills”) to provide a short-term, risk-free instrument that enhances liquidity management, settlement flexibility, and reserve optimization across all institutional participants.

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2. Objectives​

• Provide a short-term, FRB-backed investment and settlement instrument.
• Strengthen interbank liquidity without depleting verified cash reserves.
• Offer institutions a flexible tool for managing short-term obligations.
• Support monetary operations and yield-curve formation in Redmont’s capital market.

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3. Instrument Design​

Element	Specification
Issuer	Federal Reserve Bank of Redmont
Instrument Format	Zero-coupon, issued at a discount to face value
Maturity Options	15 – 90 days (approximately 2 weeks to 3 months)
Yield Basis	Weekly equivalent of the prevailing FRB Discount Rate
Redemption	Full face-value redemption at maturity (auto-settled)
Tramsferability	Freely tradable between registered institutions on the FRB ledger
Demonimation	Minimum R$ 1 000 000

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4. Issuance Framework​

Auction Cadence. FRB conducts weekly T-Bill auctions.
Settlement Timing. T + 0 or T + 5 settlement via the official FRB ledger.
Subscription Eligibility.
(a) All Financial Institutions registered with the Department of Commerce (DOC) and maintaining verified Reserve Accounts under Policy R-001.
(b) Institutional participants must fund subscriptions from verified FRB-ledger reserves; off-ledger or unverified balances are prohibited.
Allocation. Bids are awarded on a competitive-yield basis, subject to FRB allotment limits.
Redemption. Principal is automatically redeemed to each subscriber’s Reserve Account on the maturity date.

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5. Liquidity and Compliance Safeguards​

• Reserve Linkage. Purchases of T-Bills may not reduce an FI’s Reserve Ratio below the minimum set in Policy R-001 § 4 (3).
• Verified Funding. All subscriptions are cross-checked against actual Reserve Account balances before settlement.
• Transfer Registration. Any secondary trade must be recorded on the FRB ledger to maintain traceability and prevent off-ledger speculation.
• No Derivatives or Leverage. Institutions may not create derivative instruments or leveraged positions based on FRB T-Bills.
• Audit Trail. All auctions, settlements, and redemptions are logged for Inspector-General audit (FRA § 8 (10)–(13)).

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6. Profit Limitation and Distribution Duty​

(a) Dealers as Facilitators. Financial Institutions act solely as facilitators for liquidity circulation, not as profit-seeking traders.
(b) Uniform Pricing. T-Bills must be sold or transferred at FRB-set yields; no markup or hidden fee beyond approved service charges.
(c) Redistribution Duty. At least 80 % of any allotment acquired at auction must be redistributed or utilized for settlement within the same cycle.
(d) No Speculation. Secondary sales above FRB-set yield or any profit derived therefrom must be remitted to the FRB within 3 days.
(e) Penalties. Breach of this section constitutes misconduct under FRA § 8 and may result in suspension of dealer privileges.

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7. Systemic Benefits​

• Enhances interbank liquidity and settlement efficiency.
• Reduces reliance on immediate cash transfers.
• Provides a secure, FRB-backed, tradable near-cash instrument.
• Increases transparency and stability in the short-term money market.
• Strengthens public and institutional confidence in Redmont’s monetary system.

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8. Redundancy and Safeguards​

• All T-Bills are fully backed and guaranteed by the FRB.
• Redemption risk is null; default scenarios require congressional override.
• No additional minting authority is required; issuances draw from verified FRB reserves.
• All issuances, transfers, and redemptions are recorded on the official FRB ledger, with supporting entries logged through Treasury Operations’ designated auction and transfer channels.
• This dual-record structure ensures every T-Bill movement is auditable, prevents off-ledger activity, and maintains complete monetary neutrality.

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9. Implementation Roadmap​

• Authorization. Requires full Board motion approval.
• System Setup. Development of auction, registry, and tracking systems.
• Public Ruleset. FRB publishes the operational guide for auctions and settlements.
• Pilot Issuance. A capped initial tranche to test market function.
• Full Rollout. Expansion following pilot review and Inspector-General verification.

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10. Policy Oversight and Review​

Authority: Federal Reserve Board (FRA § 5).
Voting: Majority of Sitting Members; DOC Secretary votes only to break ties.
Review Cycle: Monthly review of discount rate and yield alignment with macroeconomic conditions.
Transparency: Auction results and aggregate holdings published with the monthly FRB report (FRA § 8 (1)).
Continuity: This policy remains in force under FRA § 11 until repealed or superseded.