IIB Recommends Improvements to Discount Window Operations

The Institute of International Bankers urged the Federal Reserve Board ("FRB") to improve the discount window and intraday credit processes to better service Foreign Banking Organizations ("FBOs").

In a comment letter responding to the FRB's Request for Information, the IIB welcomed the FRB's efforts to improve the discount window but highlighted several operational shortcomings. The FRB recommended:

• "allow[ing] FBOs to submit discount window access documents with electronic signatures, similar to domestic institutions, or by electronic portal ..."
• "reduc[ing] the operational burdens associated with pledging loans" and "simplify the process of pledging loans with foreign obligors or that benefit from foreign guarantors."
• "implement[ing] a more accessible and automated method of determining the potential lendable value of pledged loans and securities."
• "extend[ing] the processing deadlines for the pledging of securities collateral" and "make intraday credit easier to understand and use."
• "extend[ing] processing deadlines for requesting advances and make opening hours uniform across Reserve Bank districts and time zones to prevent unnecessary frictions."

The IIB also commented on the potential expansion of Fedwire Funds Service and National Settlement Service operating hours, urging the FRB to ensure that "the discount window [is] available during the expanded hours." Alternatively, the IIB recommended that the FRB "alleviate the penalties for relying on overnight extensions of credit."

The IIB said it supports efforts to make the discount window process more efficient through initiatives like Discount Window Direct. IIB proposed that the FRB "consider creative mechanisms to incentivize test draws from the discount window."