Fed Streamlines Borrower-In-Custody Program In Discount Window Overhaul
By CU Today Staff —
WASHINGTON—The Federal Reserve is simplifying its Borrower-in-Custody program as part of its broader discount window modernization effort, with changes aimed at making it faster and easier for eligible financial institutions to pledge loans as collateral. The changes take effect Sept. 8.
Under the BIC program, eligible institutions can pledge a wide range of loans to the Federal Reserve while retaining possession of the underlying collateral, allowing them to maximize potential discount window liquidity. The Fed said new standardized application, modification and certification forms will be used across Reserve Banks, while most institutions will no longer face pre-enrollment inspections and application documentation will be streamlined in many cases.
The Fed is also automating more of the process. Institutions will be able to upload collateral schedules through Discount Window Direct, while ongoing compliance certification requirements will be simplified. Institutions will no longer have to report when the aggregate outstanding balance of pledged loan collateral declines by more than 10%.
Periodic inspections will be refocused on data quality, whether pledged loans meet acceptance criteria and whether institutions have adequate internal controls identifying the loans as pledged to and under the control of the Reserve Bank. The Fed also plans to narrow required supporting documentation and consolidate BIC requirements and forms on its discount window website. More detailed information is expected in September, and Reserve Bank teams may contact institutions currently participating in the program ahead of implementation.
Originally reported by CU Today.