Pro Tip
Red Flag: When a bank borrows from the FED Discount window, it could be seen as a red flag indicator.
Vibe
TAINTED LOVE
... Sometimes I feel I've got to run away I've got to get away From the pain you drive into the heart of me The love we share seems to go nowhere And I've lost my life For I toss and turn, I can't sleep at night
What is the FED discount window?
The discount window is a central bank lending facility meant to help commercial banks manage short-term liquidity needs. Banks that are unable to borrow from other banks in the fed funds market may borrow directly from the central bank’s discount window paying the federal discount rate
What is the FED discount window rate?
The Federal Reserve Bank “discount rate” is the interest rate that banks pay to The FED for a collateralized loan.
Why is the FED discount window rate important?
By providing ready access to funding, the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for their customers, such as withdrawing credit during times of market stress.
