By Jonnelle Marte
(Reuters] – Banks could have access to the domestic standing repo facility that was established this year by Federal Reserve by next year’s beginning, a Federal Reserve officer in New York stated on Thursday.
Lorie Logan (executive vice president of the New York Fed) said that the U.S. central banks began to accept applications earlier this month from banks for the program. This allows financial companies to borrow money on an overnight basis.
The facility is currently only available to two dozen Wall Street primary dealer who serve as counterparts for the Fed.
Logan stated that the Fed’s two permanent repurchase options, one for domestic and one to foreign monetary authorities, were intended to act as an occasional backstop and not to be as frequently as other instruments it uses to regulate interest rates.
This is contrary to New York Fed’s overnight repurchase facility which allows firms to store cash overnight and receive a return. Logan stated that although firms are finding it difficult to place excess cash, they have driven the use to the program to new records in recent months. However Logan indicated that officials don’t seem to be concerned about the increased usage.
She said that financial firms might not use the reverse repo facility as often in the future, if Treasury securities are effected more frequently, which could give them additional options for how to invest their money.
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