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The Federal Reserve Board on Sunday announced several initiatives to provide additional support to financial markets, including enhancements to its existing liquidity facilities.
"In close collaboration with the Treasury and the SEC, we have been in ongoing discussions with market participants to identify potential market vulnerabilities in the wake of an unwinding of a major financial institution and to consider appropriate official sector and private sector responses," said Federal Reserve Board Chairman Ben Bernanke and announced steps to mitigate the potential risks and disruptions to markets “along with significant commitments from the private sector".
The collateral eligible to be pledged at the Primary Dealer Credit Facility (PDCF) has been broadened to closely match the types of collateral that can be pledged in the tri-party repo systems of the two major clearing banks.
The collateral for the Term Securities Lending Facility (TSLF) has been expanded; eligible collateral for Schedule 2 auctions will now include all investment-grade debt securities.
The Board also adopted an interim final rule that provides a temporary exception to the limitations in section 23A of the Federal Reserve Act. It allows all insured depository institutions to provide liquidity to their affiliates for assets typically funded in the tri-party repo market. This exception expires on