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MNI INTERVIEW: Fed Should Mandate Readiness Of Discount Window

(MNI) WASHINGTON

NY Fed's ex-discount window chief says the central bank needs to do more to ensure banks can access primary credit in times of stress.

The Federal Reserve needs to do more to modernize the discount window and ensure banks' operational readiness in times of crisis, including mandating testing of the facility at regular intervals, an ex-Federal Reserve staffer and former head of the discount window told MNI.

"It would be useful to say you must use the discount window as a form of liquidity in your contingency funding plan, and to require banks to test it at some frequency to ensure that they know how to use it and are aware of all the operating cutoffs and practical considerations on any given day," said Susan McLaughlin.

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The Federal Reserve needs to do more to modernize the discount window and ensure banks' operational readiness in times of crisis, including mandating testing of the facility at regular intervals, an ex-Federal Reserve staffer and former head of the discount window told MNI.

"It would be useful to say you must use the discount window as a form of liquidity in your contingency funding plan, and to require banks to test it at some frequency to ensure that they know how to use it and are aware of all the operating cutoffs and practical considerations on any given day," said Susan McLaughlin.

Keep reading...Show less