The largest U.S. banks announced Monday night they plan to access the Federal Reserve’s “discount window” to help financial institutions navigate the crisis caused by the coronavirus pandemic.
“While Forum member institutions individually have substantial liquidity and multiple sources of funding, they believe it is important to lead by demonstrating the value of the Federal Reserve’s discount window facility and to encourage its use by other financial institutions,” according to a news release from the Financial Services Forum.
The Forum is made up of the chief executive officers of the eight largest banks.
The Fed’s discount window supports the flow of credit to households and businesses by allowing banks to borrow money from the Fed on a short-term basis to meet temporary shortages of liquidity caused by challenges – such as the pandemic or the financial crisis of 2008.
Earlier Monday, federal banking agencies on urged lending institutions to use the discount window. The Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency encouraged “depository institutions to use the discount window to meet demands for credit from households and businesses at this time.”
Banks borrowed $403.5 billion from the Fed’s discount window in October 2008, a month after the Lehman Brothers’ collapse. Previously, banks borrowed $3.4 billion after 9/11.
Financial Services Forum member institutions are Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley, State Street, and Wells Fargo.
“The Forum banks are strong, well-capitalized and committed to supporting their customers, clients and the economy as the world confronts the challenge of the COVID-19 pandemic,” the Forum said.