(Reuters) – Federal Reserve Governor Michelle Bowman on Thursday said banks’ use of the Fed’s discount window is for emergencies, rather than for more usual liquidity needs, a narrow view of the facility that appears to contrast with a recent push by banking regulators to get banks to use it more readily.
There are downsides to discount window borrowing, Bowman told the Mid-size Bank Coalition of America Board of Directors Workshop, and that while banks ought to sign up and perhaps even test it, forcing them to post collateral at the facility when they may have other needs for those assets could have “unintended consequences.”
(Reporting by Ann Saphir)
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