Board of Governors of the Federal Reserve System.
Final rule.
The Board of Governors of the Federal Reserve System (Board) has adopted final amendments to its Regulation A to reflect the Board's approval of a reduction in the primary credit rate at each Federal Reserve Bank. The secondary credit rate at each Reserve Bank automatically decreased by formula as a result of the Board's primary credit rate action.
The amendments to part 201 (Regulation A) are effective August 24, 2007. The rate changes for primary and secondary credit were effective on the dates specified in 12 CFR 201.51, as amended.
Jennifer J. Johnson, Secretary of the Board (202/452–3259); for users of Telecommunication Devices for the Deaf (TDD) only, contact 202/263–4869.
The Federal Reserve Banks make primary and secondary credit available to depository institutions as a backup source of funding on a short-term basis, usually overnight. The primary and secondary credit rates are the interest rates that the twelve Federal Reserve Banks charge for extensions of credit under these programs. In accordance with the Federal Reserve Act, the primary and secondary credit rates are established by the boards of directors of the Federal Reserve Banks, subject to the review and determination of the Board.
The Board approved requests by the Reserve Banks to reduce by 50 basis points the primary credit rate in effect at each of the twelve Federal Reserve Banks, thereby decreasing from 6.25 percent to 5.75 percent the rate that each Reserve Bank charges for extensions of primary credit. As a result of the Board's action on the primary credit rate, the rate that each Reserve Bank charges for extensions of secondary credit automatically decreased from 6.75 percent to 6.25 percent under the secondary credit rate formula. The final amendments to Regulation A reflect these rate changes.
The Board's action narrows the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points. As indicated in the Board's press release announcing this action, the changes to the primary credit discount window facility are intended to promote the restoration of orderly conditions in financial markets. In addition, the press release stated:
The Board is also announcing a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained.
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 605(b)), the Board certifies that the new primary and secondary credit rates will not have a significantly adverse economic impact on a substantial number of small entities because the final rule does not impose any additional requirements on entities affected by the regulation.
The Board did not follow the provisions of 5 U.S.C. 553(b) relating to notice and public participation in connection with the adoption of these
Banks, Banking, Federal Reserve System, Reporting and recordkeeping.
12 U.S.C. 248(i)–(j), 343
(a)
(b)