The Federal Reserve Board today issued a final rule, as required by the Dodd-Frank Act, specifying procedures and requirements for emergency lending under the Federal Reserve Act. The rule clarifies the definition of “broad-based eligibility” for programs and facilities providing emergency loans, and expands the definition of “insolvency” to include borrowers who fail to pay undisputed debts in the 90 days prior to borrowing.
The rule requires that the interest rate for emergency lending credit be set at a premium to encourage repayment and discourage continued use of the program as circumstances return to normal. It also requires, as specified by Dodd-Frank, that all emergency lending programs under Section 13(3) of the Federal Reserve Act be approved by the secretary of the Treasury. The final rule will take effect Jan. 1, 2016.