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FR2046_20160830_omb

ICR 201608-7100-020 · OMB 7100-0289 · Object 67711601.

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Supporting Statement for the
Selected Balance Sheet Items for Discount Window Borrowers
(FR 2046; OMB No. 7100-0289)
Summary
The Board of Governors of the Federal Reserve System (Board), under delegated
authority from the Office of Management and Budget (OMB), proposes to extend for three years,
without revision, the Selected Balance Sheet Items for Discount Window Borrowers (FR 2046;
OMB No. 7100-0289). These data are used to monitor discount window borrowing. The
Federal Reserve’s Regulation A, Extensions of Credit by Federal Reserve Banks, requires that
Reserve Banks review balance sheet data in determining whether to extend credit and to help
ascertain whether undue use is made of such credit. Depository institutions that borrow from the
discount window report on the FR 2046 certain balance sheet data for a period that encompasses
the dates of borrowing. The total annual burden for the FR 2046 is estimated to be 384 hours.
Background and Justification
The Federal Reserve’s Regulation A establishes rules under which Federal Reserve
Banks may extend credit to depository institutions and defines three basic lending programs:
primary credit, secondary credit, and seasonal credit.1 Primary credit is designed as a back-up
funding source to assist depository institutions in meeting very short-term needs (usually
overnight). Since such credit is provided at an above-market rate and ordinarily is available to
generally sound depository institutions, there is little or no administrative burden on the borrower
or the Reserve Banks. Secondary credit is designed as a back-up funding source for depository
institutions that do not qualify for primary credit. Such credit may be provided to meet
temporary funding needs of an institution if such a credit extension would be consistent with the
institution’s timely return to a reliance on market funding sources, or if such credit would
facilitate the orderly resolution of serious financial difficulties of the borrowing institution.
Unlike primary credit borrowers, secondary credit borrowers are subject to a higher level of
administration by the lending Reserve Bank and therefore subject to a slightly higher interest
rate. In these cases, supplemental information for monitoring the borrower would likely be
obtained from other sources, such as direct contacts with banking regulators. Seasonal credit is
designed to assist smaller institutions in meeting longer-term funding needs arising from regular
intra-year patterns in deposits and loans. Regulation A requires that Reserve Banks ensure that
the borrower’s funding need is truly seasonal in nature and that it will persist for at least four
weeks. Seasonal credit is provided at a market-related rate. Nonetheless, borrowers may still
find the rate charged on seasonal credit attractive relative to the rates they would be charged for
comparable credit arrangements from market sources. Therefore, while borrowing at the

Regulation A also defines “Emergency credit for others”—under which in unusual and exigent circumstances,
credit may be extended to any participant in a program or facility with broad-based eligibility—and a temporary
Term Auction Facility (TAF)—in which depository institutions obtain discount window loans at an interest rate that
is determined as the result of an auction. Borrowers of emergency credit for others and TAF credit are not required
to file the FR 2046.
1

discount window, seasonal borrowers must agree to limit their net federal funds sales to an
amount consistent with their usual operating pattern.2
In 1998, the Subcommittee on Credit, Reserves, and Risk Management (SCRRM)
requested standardized data reporting for discount window monitoring as part of its broader
effort to promote greater uniformity across the Federal Reserve System in the administration of
the discount window.3 There had been considerable variation across Districts in the specific data
elements collected, in the time periods for which data were requested, and in the formats in
which data were reported. The implementation of the FR 2046 standardized these aspects of data
collection across Reserve Banks and, in many cases, reduced reporting burden relative to that
under the previous data reporting procedures. In 2003, the FR 2046 was updated owing to
changes to Regulation A (the establishment of the primary and secondary credit programs) with
no substantial changes to the reporting form or the instructions. In 2010, the FR 2046 was
revised to be consistent with the 2009 revisions to the (FR 2644) so that respondents that provide
Wednesday-only data on the FR 2046 and file the FR 2644 need not report data items that are
commonly defined in both reports. In 2013, the FR 2046 was revised to update data element
definitions to account for the discontinuance of the Thrift Financial Report (OTS Form 1313).
Also, an additional exception to reporting was added: institutions that file the FR 2644 need not
report the Wednesday-only data item for total loans on the FR 2046.
There are many cases in which discount window borrowing might be considered
inappropriate and inconsistent with Regulation A. For example, using the primary or secondary
credit programs as a primary funding source, or using seasonal credit to meet a non-seasonal
funding need, would be considered inappropriate. To guard against such situations,
Regulation A (12 CFR 201.3(c)(2)-(3)) requires Reserve Banks to consider the balance sheet
information of borrowers in determining whether to extend credit and to ensure that any credit
provided is used for an appropriate purpose. Questionable behavior might lead to follow-up
discussions with the borrower concerning their circumstances at the time of borrowing and to
counseling if their borrowing is deemed to have been inappropriate.
As noted above, there is usually little or no administrative burden on primary credit
borrowers, and the FR 2046 will usually not be collected from them. However, the FR 2046 may
be required from a primary credit borrower in very unusual circumstances, such as frequent
borrowing or if there is information to suggest that undue use is being made of the credit. In
these cases, information on federal funds sold and purchased (including resale and repurchase
agreements, respectively) would be important in identifying situations in which an institution
might be attempting to substitute borrowing at the discount window for its normal market
sources of funding. In addition, information on total assets, loans, deposits, and securities could
be used to assess the borrower’s funding need or use of the credit. Because primary credit is
extended for very short terms, daily data are necessary to capture the borrower’s balance sheet
trends.

2

See S-Letter 2487, March 1985.
This subcommittee is now known as SCRM (Subcommittee on Credit Risk Management). SCRM is a
subcommittee of the Conference of Presidents’ Committee on Credit and Risk Management.
3

2

The FR 2046 data are not routinely collected from secondary credit borrowers if adequate
information on the need for funding and the reason for borrowing from the Federal Reserve is
available from other sources, such as direct contacts with banking regulators. However, because
secondary credit borrowers are not in generally sound condition, they are subject to a higher
level of administration by the lending Reserve Bank. For example, if the loan is requested for a
reason other than to cover an unexpected overdraft, the borrower is not allowed to increase its
net exposure to other depository institutions—such as by selling federal funds—without
permission. The FR 2046 data may be required if the Reserve Bank becomes concerned about
the frequency or size of the institution’s borrowing. The use of the data is very similar to that
described for primary credit. Secondary credit is generally extended for one day at a time;
therefore, daily data are necessary to capture the borrower’s balance sheet trends.
The FR 2046 data are collected primarily from seasonal credit borrowers. Information on
federal funds sold and purchased is important to guard against situations in which a bank might
be using seasonal credit inappropriately. Under the terms of the program, seasonal credit
borrowers may be net sellers of federal funds while borrowing at the discount window, as long as
this pattern is consistent with their normal operating practices. The information obtained on
federal funds sold and purchased on the FR 2046 is used by discount officers to assess whether a
seasonal borrower’s position in the federal funds market is consistent with normal operations.
Similarly, information on a seasonal borrower’s total assets, loans, securities and deposits
is used to monitor whether loans advanced at the discount window are being used for the
intended purpose. Total loans and total deposits are used in monitoring an institution’s net funds
availability (defined as total deposits less total loans) during the period of borrowing. Historical
data on net funds availability is a key variable used in establishing an institution’s seasonal credit
line. Discount officers monitor net funds availability during the period of borrowing to ensure
that an institution’s actual funding need during the year is consistent with its seasonal credit line.
In addition, information on total assets, loans, and securities is used to ensure that seasonal credit
is used appropriately. Many seasonal credit borrowers, for example, exhibit a marked increase in
their loan portfolios over the first three quarters in each year reflecting increased agricultural
credit demands. Later in the year, loan demand at these banks subsides as farmers sell their
crops and repay their outstanding bank loans with the proceeds. Deviations from this typical
pattern might indicate that seasonal credit was being used inappropriately. For example, if a
seasonal borrower’s total loans increased only modestly during the year while its securities
portfolio expanded sharply, discount officers might contact the institution to verify whether it
remained eligible for the seasonal credit program.
Seasonal credit is typically extended over lengthy periods, and the borrower’s funding
need is expected to change slowly over the term of the borrowing. Therefore, Wednesday-only
data provide an adequate picture of a borrower’s balance sheet trends. In cases where seasonal
credit is extended to institutions in marginal financial condition, increased monitoring of the
borrower is required, and daily data may be collected at the Reserve Bank’s discretion.

3

Description of Information Collection
Table 1 lists the data elements that are reported on the FR 2046. Data are reported
weekly for each two-week period in which a borrowing is outstanding. All data are reported for
the borrower’s domestic offices only and reported in thousands of dollars. The data elements
include the amounts of total securities, federal funds sold and securities purchased under
agreements to resell, total loans, total assets, total deposits, and federal funds purchased and
securities sold under agreements to repurchase.
Primary or secondary credit borrowers report daily data. A borrower need not supply
deposit data on the FR 2046 when it already files such information weekly on the Report of
Transaction Accounts, Other Deposits, and Vault Cash (FR 2900; OMB No. 7100-0087). For
these respondents, the two-week reporting period corresponds to their reserve maintenance
period.
Seasonal credit borrowers report Wednesday-only data. Depositories that already report
total securities, federal funds sold and resale agreements, total loans, and total assets weekly on
the Weekly Report of Selected Assets and Liabilities of Domestically Chartered Commercial
Banks and U.S. Branches and Agencies of Foreign Banks (FR 2644; OMB No. 7100-0075) or
total deposits weekly on the FR 2900 or on the FR 2644 do not need to provide these data on the
FR 2046.4

4

The FR 2644 and the FR 2900 employ somewhat different concepts of total deposits. Either concept is adequate
for the purpose of monitoring discount window borrowers.

4

Table 1 -Data Items on the FR 2046

Type of
Credit

File Type	application/pdf
File Title	FR2046_20160830_omb
File Modified	2016-08-30
File Created	2016-08-30