Federal Reserve Regulation A: Discount Window Credit Programs

Federal Reserve Regulation A, codified at 12 CFR Part 201, sets the rules for the Federal Reserve’s discount window — the facility through which Reserve Banks make short-term, collateralized loans directly to depository institutions. The rules cover who can borrow, under which of the standing credit programs, at what rate, against what collateral, and with what paperwork in place beforehand. Nothing in Regulation A entitles any institution to receive a loan; the Reserve Bank decides whether to lend.¹

Which Institutions Can Borrow

Regulation A defines “depository institution” broadly. Under 12 CFR 201.2, eligible borrowers include insured commercial banks, mutual savings banks, savings banks, savings associations, and insured credit unions, along with members of the Federal Home Loan Bank system.² The institution has to maintain reservable transaction accounts or nonpersonal time deposits and sit under federal supervisory oversight.

U.S. branches and agencies of foreign banks can also use the discount window. They are held to the same collateral and reporting standards as domestic institutions and must submit additional documentation, including legal opinions from both foreign and domestic outside counsel, before borrowing.³

The Three Standing Credit Programs

12 CFR 201.4 establishes the Fed’s lending programs.⁴ Three of them are what any eligible institution will actually use: primary credit, secondary credit, and seasonal credit.

Primary Credit

Primary credit is the main program. It offers overnight loans to institutions in generally sound financial condition. To qualify, a bank typically needs a CAMELS composite rating of 3 or better and a Prompt Corrective Action designation of “adequately capitalized” or stronger.⁵ There is no requirement to exhaust other funding sources first, and no restriction on how the money is used.

Secondary Credit

Institutions that don’t qualify for primary credit can borrow under secondary credit, but the terms are tighter. The rate is 50 basis points above the primary credit rate, the Reserve Bank monitors the borrower more closely, loans are typically overnight, and most pledged collateral takes an additional margin reduction, lowering effective borrowing capacity.⁵ The program assumes the borrower is working its way back to private-market funding rather than relying on the Fed for an extended period.

Seasonal Credit

Smaller institutions with predictable swings in deposits and loans — community banks in agricultural or tourism-dependent areas, for example — can apply for seasonal credit. These loans run weeks or months, not overnight. The rate floats, recalculated every two weeks as the average of the federal funds rate and the three-month certificate-of-deposit rate, rounded to the nearest five basis points.⁶ The institution has to demonstrate a clear, recurring pattern of seasonal funding needs.

What Borrowing Costs

The primary credit rate is pegged to the top of the FOMC’s federal funds target range. As of March 2026, the target range is 3.50 to 3.75 percent and the primary credit rate stands at 3.75 percent.⁷ That is deliberate: discount window borrowing is meant to cost at least as much as borrowing in the interbank market, so the window stays a backstop rather than a cheap alternative.

Secondary credit adds 50 basis points to that figure, putting it at 4.25 percent at current levels.⁵ Seasonal credit floats on its own biweekly formula.⁶ When the FOMC moves its target range, primary and secondary credit rates move with it.

Collateral Rules

Every discount window loan must be fully collateralized. The accepted range is wider than most people expect: Treasury securities, agency debt, investment-grade municipal bonds, corporate bonds, asset-backed securities, agency mortgage-backed securities, and individual commercial and consumer loans all qualify.⁸ The Fed publishes margin schedules that determine how much of an asset’s value counts toward borrowing capacity.

For securities, margins are generous at the top of the credit spectrum and shrink as quality drops. A short-duration Treasury note receives 99 percent of its market value. A long-duration BBB-rated corporate bond can receive as little as 85 percent. AAA-rated collateralized loan obligations get between 70 and 91 percent, depending on duration.⁹

Loan collateral takes steeper haircuts because it is harder to price and less liquid. A minimal-risk fixed-rate commercial and industrial loan might receive 86 to 95 percent of its estimated fair value. A normal-risk floating-rate commercial real estate loan could receive as little as 35 percent. If a loan is missing data the Fed needs to value it, its collateral value is zero.⁹ Any shortfall between pledged collateral and outstanding borrowings has to be cured immediately.

Where Collateral Is Held

Institutions have three options for holding pledged collateral. They can deliver securities directly to the Reserve Bank, place them with a third-party custodian, or — for loan portfolios — use a borrower-in-custody arrangement in which the loans stay on-site. Borrower-in-custody is popular because it avoids moving loan documents, but the institution must segregate pledged assets from unpledged ones, designate them on its general ledger, and keep original promissory notes in a fireproof vault or secured enclosure.¹⁰

Getting Set Up Before You Need to Borrow

No borrowing happens until the institution completes the Operating Circular No. 10 (OC-10) package with its local Reserve Bank. The package includes a letter of agreement, a certificate confirming the institution’s legal details, a board-approved authorizing resolution naming the individuals who may request advances and pledge collateral, and an official authorization list identifying those individuals.³ Foreign bank branches add legal opinions from U.S. and foreign counsel.

Only people on the official authorization list can submit borrowing requests or pledge collateral. If the institution’s name, jurisdiction of organization, or other certificate details change, the Reserve Bank must get at least 30 days’ written notice and an updated certificate.³ OC-10 documents are official records and must be maintained by the borrower.

The Fed also pushes institutions to run periodic test borrowings during calm periods. Waiting until a liquidity crunch to work out the mechanics tends to end badly, and the Fed’s position is that routine test transactions materially improve readiness.¹¹

Requesting, Receiving, and Repaying an Advance

Once OC-10 is on file and collateral is pledged, requesting a loan is simple. An authorized individual can call the local Reserve Bank’s discount window desk or submit the request through Discount Window Direct (DWD), a self-service platform on the FedLine network. DWD is available around the clock for most functions, but borrowing requests themselves have to come in during the Reserve Bank’s business hours.¹²

Approved funds are credited to the borrower’s reserve account or a designated correspondent account. Most advances settle late in the business day, which helps institutions meet end-of-day settlement obligations. Principal and accrued interest are debited automatically from the same account on the maturity date.¹³

Limits on Lending to Weak Institutions

Regulation A caps how long a Reserve Bank can keep lending to a troubled bank. An undercapitalized institution can have discount window advances outstanding for no more than 60 days within any 120-day period. That window can be extended for another 60 calendar days if the Board Chair or the head of the relevant federal banking agency certifies in writing that the institution is viable. Beyond those limits, the Reserve Bank has to consult the Board of Governors before extending further credit.¹⁴

For critically undercapitalized institutions, lending is permitted only during the first five days after that designation. Any additional lending requires Board of Governors consultation.¹⁴ Prolonged Fed lending to a failing bank shifts losses from the bank’s creditors to the Federal Reserve.

Public Disclosure of Borrowing

Discount window borrowing used to be confidential. The Dodd-Frank Act changed that. The Federal Reserve now has to publish borrower-level data on a roughly two-year lag, including the name of the borrowing institution, the amount borrowed, the interest rate paid, and the types and amounts of collateral pledged.¹⁵ The requirement applies to all discount window loans outstanding on or after July 21, 2010. The two-year delay is designed to provide public accountability without inflaming the long-standing stigma around tapping the window.

Emergency Lending Under Section 13(3)

The emergency lending authority that gets most of the public attention is a separate track from the standing programs above. Under Section 13(3) of the Federal Reserve Act, the Board of Governors can authorize lending to participants beyond the usual pool of depository institutions, but only in “unusual and exigent circumstances” and only on an affirmative vote of at least five Board members.¹⁶ This authority is not available to an individual bank in ordinary circumstances.

Post-crisis reforms under Dodd-Frank narrowed how it can be used. Any 13(3) program must have “broad-based eligibility,” targeting an identifiable market or sector rather than rescuing a single firm. It cannot be designed to bail out a failing company, cannot limit participation to fewer than five entities, and cannot lend to anyone who is insolvent.⁴ The Secretary of the Treasury must approve the program before launch, collateral has to be sufficient to protect taxpayers, and the Board must report to Congress within seven days of authorizing assistance, with written updates every 30 days afterward.¹⁶

1
eCFR. 12 CFR 201.3 – Extensions of Credit Generally
2
eCFR. 12 CFR 201.2 – Definitions
3
Federal Reserve Bank Services. Operating Circular No. 10 – Lending
4
eCFR. 12 CFR 201.4 – Availability and Terms of Credit
5
Federal Reserve Discount Window. Primary and Secondary Credit Programs
6
Federal Reserve Discount Window. Seasonal Credit Program
7
Federal Reserve Discount Window. Discount Window
8
Federal Reserve Discount Window. Collateral Eligibility
9
Federal Reserve Discount Window. Collateral Valuation
10
Federal Reserve Bank of Cleveland. Borrower-in-Custody Collateral Program Guidelines
11
Federal Reserve Board. Discount Window Readiness
12
Federal Reserve Discount Window. Discount Window Direct
13
Federal Reserve Discount Window. Getting Started
14
eCFR. 12 CFR 201.5 – Limitations on Lending to Undercapitalized and Critically Undercapitalized Insured Depository Institutions
15
Federal Reserve Board. Discount Window Lending
16
Federal Reserve Board. Section 13 – Powers of Federal Reserve Banks