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Credit and Liquidity Programs and the Balance Sheet
Lending to primary dealers
Primary Dealer Credit Facility
On March 16, 2008, the Federal Reserve announced the creation of the Primary Dealer Credit Facility (PDCF). The PDCF is an overnight loan facility that provides funding to primary dealers and helps foster improved conditions in financial markets more generally. Operational details of the facility are explained on the website of the Federal Reserve Bank of New York.
PDCF credit is fully secured by collateral with appropriate haircuts--that is, the value of the collateral exceeds the value of the loan extended. Initially, eligible collateral was restricted to investment-grade securities. On September 14, 2008, the eligible set of collateral was broadened to closely match the types of instruments that can be pledged in the tri-party repurchase agreement systems of the two major clearing banks. Information on collateral policies and interest rates charged for lending are discussed in the collateral and rate setting and risk management sections of this website. On September 21, 2008, the Federal Reserve Board authorized the extension of credit to a set of other securities dealers on very similar terms to the PDCF. Credit extended under either program is reported in table 1 of the H.4.1 statistical release as "Primary dealer and other broker-dealer credit" and is included in "Other loans" in tables 9 and 10.
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Federal Reserve Bank of New York
Securities Lending
The Federal Reserve Bank of New York operates a securities lending program to provide a temporary source of Treasury securities to promote the smooth clearing of the Treasury securities market. Securities loans are awarded to primary dealers based on a competitive auction for overnight loans against other Treasury securities as collateral. A description of the program is presented on the website of the Federal Reserve Bank of New York, as are the terms of the program and the securities lending operations that are conducted. Securities lent on an overnight basis through this facility are presented in table 1A of the H.4.1 statistical release.Term Securities Lending Facility
On March 11, 2008, the Federal Reserve announced the creation of the Term Securities Lending Facility (TSLF) under the authority of section 13(3) of the Federal Reserve Act. The TSLF loans Treasury securities to primary dealers for one month against eligible collateral. For so-called "Schedule 1" auctions, the eligible collateral comprises Treasury securities, agency securities, and agency mortgage-backed securities. For "Schedule 2" auctions, the eligible collateral includes schedule 1 collateral plus highly rated private securities. The program supports the liquidity of primary dealers and fosters improved conditions in financial markets more generally. Information on collateral policies and interest rates charged for lending are discussed in the collateral and rate setting and risk management sections of this website. Operational details of the TSLF are published on the Federal Reserve Bank of New York website. Securities lent through the TSLF are reported in table 1A of the H.4.1 statistical release.
Term Securities Lending Options Program
The Term Securities Lending Facility Options Program (TOP) offers an option to primary dealers to draw upon short-term, fixed rate TSLF loans from the System Open Market Account portfolio in exchange for eligible collateral. The options are awarded through a competitive auction. The program is intended to enhance the effectiveness of the TSLF by offering additional liquidity during periods of heightened collateral market pressures, such as around quarter-end dates. A description of the program is published on the Federal Reserve Bank of New York website. When options under this program are outstanding, they are presented in a footnote to table 1A in the H.4.1 statistical release.
