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(a) Primary
credit. A Federal Reserve Bank may extend primary credit on a
very short-term basis, usually overnight, as a backup source of
funding to a depository institution that is in generally sound
financial condition in the judgment of the Reserve Bank. Such primary
credit ordinarily is extended with minimal administrative burden on
the borrower. A Federal Reserve Bank also may extend primary credit
with maturities up to a few weeks as a backup source of funding to a
depository institution if, in the judgment of the Reserve Bank, the
depository institution is in generally sound financial condition and
cannot obtain such credit in the market on reasonable terms. Credit
extended under the primary credit program is granted at the primary
credit rate.
(b) Secondary credit. A Federal Reserve Bank may
extend secondary credit on a very short-term basis, usually overnight,
as a backup source of funding to a depository institution that is not
eligible for primary credit if, in the judgment of the Reserve Bank,
such a credit extension would be consistent with a timely return to a
reliance on market funding sources. A Federal Reserve Bank also may
extend longer-term secondary credit if the Reserve Bank determines
that such credit would facilitate the orderly resolution of serious
financial difficulties of a depository institution. Credit extended
under the secondary credit program is granted at a rate above the
primary credit rate.
(c) Seasonal credit. A Federal Reserve Bank may
extend seasonal credit for periods longer than those permitted under
primary credit to assist a smaller depository institution in meeting
regular needs for funds arising from expected patterns of movement in
its deposits and loans. An interest rate that varies with the level of
short-term market interest rates is applied to seasonal credit.
(1) A Federal Reserve Bank may extend seasonal credit only if:
(i) The depository institution's seasonal needs exceed a
threshold that the institution is expected to meet from other sources
of liquidity (this threshold is calculated as a certain percentage,
established by the Board of Governors, of the institution's average
total deposits in the preceding calendar year); and
(ii) The Federal Reserve Bank is satisfied that the institution's
qualifying need for funds is seasonal and will persist for at least
four weeks.
(2) The Board may establish special terms for seasonal credit
when depository institutions are experiencing unusual seasonal demands
for credit in a period of liquidity strain.
(d) Emergency credit for others. In unusual and
exigent circumstances and after consultation with the Board of
Governors, a Federal Reserve Bank may extend credit to an individual,
partnership, or corporation that is not a depository institution if,
in the judgment of the Federal Reserve Bank, credit is not available
from other sources and failure to obtain such credit would adversely
affect the economy. If the collateral used to secure emergency credit
consists of assets other than obligations of, or fully guaranteed as
to principal and interest by, the United States or an agency thereof,
credit must be in the form of a discount and five or more members of
the Board of Governors must affirmatively vote to authorize the
discount prior to the extension of credit. Emergency credit will be
extended at a rate above the highest rate in effect for advances to
depository institutions.
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