One rapid response to the financial
crisis came from the San Francisco
Fed’s Statistics Division. With only
three weeks of lead time, the Division
implemented a new policy to pay interest
on reserve balances depository institutions
hold in accounts at the Federal Reserve. The
change, which took effect in October 2008, provided
the Federal Reserve with a tool designed
to let it expand new lending facilities while
achieving its federal funds interest rate target
for monetary policy.
latter part of year continued to set new records
for the number and value of advances made.
By year-end 2008, Twelfth District’s discount
window had extended 3,190 loans totaling
$389.3 billion, the highest loan volume in the
Federal Reserve System.
The Twelfth District’s discount window
also monitored a significantly greater number
of troubled institutions during the year as the
crisis intensified. Consequently, staff implemented
a broad range of traditional and innovative
risk controls to manage credit risk exposure
at each institution. For example, some banks
with impaired capital levels were no longer
eligible for TAF funds, long-term borrowing,
and intraday overdraft ceilings. Additionally,
certain banks were required to post transactions
in real-time to their Federal Reserve accounts to
ensure they monitored their balances throughout
Although the Financial Services Regulatory
Relief Act of 2006 had already authorized interest
payments, the change wasn’t scheduled to
begin until October 1, 2011. Congress approved
the accelerated schedule with the passage the
Emergency Economic Stabilization Act of 2008.
Banks are required to hold a portion of customer
deposits in Federal Reserve accounts.
As the manager of the computer system used
by all Reserve Banks to calculate these reserve
requirements, the Statistics Division led the
integration of the new policy to pay interest
on both required and excess reserve balances.
San Francisco also serves as headquarters for
the central bank’s national Reserve Resource
Center, which provided reserve administration
expertise for the transition.
To meet the accelerated schedule, technical
specialists within the Statistics Division modified
one of the central bank’s largest and most
complex computer systems within a narrow
window of just three weeks. Nearly 7,000 institutions—
ranging from depository institutions
and trusts to U.S. branches and agencies of foreign
banks—became eligible to earn interest on
their reserve balances.
The computer system managed by the Statistics Division that is used to calculate reserve balances and interest payments also is the central application for the collection, analysis, and reporting of many types of economic and financial data. Statistics staff and their colleagues at other Reserve Banks provide guidance to depository institutions regarding reporting requirements and continually screen institutions to ensure they comply with requirements. Inside the Federal Reserve, this data contributes to monetary policy decisions, and a large portion is used to evaluate the safety and soundness of depository institutions and assess their compliance with banking regulations.
Seated (Left to Right): Marilyn Jio, Michael Fernandez, Mohamed Sadiq, Freda Choi, Nancy Henthorne; Standing (Left to Right): Lynn Hart, Dorret Dobbs-Hunte, Tom Grybinas, Mark Tanaka, Mark Frappier, Jonathan Kayes, Jeannette Cormier, Peter Miller, Jordon Lum, Huaixi Li, Gregory Canosio, Ai-Ling Wu; Not Pictured: Frank De Castro, Leo Shebalin, Susan Wong, Annie Yee