The Federal Reserve is updating the Borrower in Custody program as part of an ongoing effort to modernize discount window operations, according to an announcement.
The BIC program allows depository institutions to pledge collateral toward discount window credit in the form of loans they hold in custody, according to the Fed. The central bank is currently rethinking discount window operations, believing banks underutilize the tool.
As part of that effort, the Fed is making the following changes to the BIC program:
- New “easy-to-use” application, modification and certification forms;
- Most institutions will no longer be required to have pre-enrollment inspections;
- Collateral schedules can now be uploaded online via Discount Window Direct;
- Instructions for certifying ongoing BIC program compliance will be simplified;
- Periodic inspections will be restructured to focus on three main items: 1) validation of data quality, 2) satisfaction of acceptance criteria for pledged loans, and 3) confirmation of the institution’s internal controls to ensure the pledged loans are identified as pledged to the Reserve Bank and subject to Reserve Bank control. Required supporting documentation will be narrowed;
- BIC requirements and forms will be posted in one place on the discount window website, making it easier to find the information institutions need.
