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 the day.

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.

Statistics 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