Circular
Federal Reserve and Other Central Banks Announce Measures Designed to Address Elevated Pressures in Short-term Funding Markets
December 12, 2007
Circular No. 11917

The Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve and the Swiss National Bank have announced measures designed to address elevated pressures in short-term funding markets.

The Federal Reserve has established a temporary Term Auction Facility (approved by the Board of Governors of the Federal Reserve System) and has also established foreign exchange swap lines with the European Central Bank and the Swiss National Bank (approved by the Federal Open Market Committee).

Under the Term Auction Facility (TAF) program, the Federal Reserve will auction term funds to depository institutions against the wide variety of collateral that can be used to secure loans at the discount window. All depository institutions that are judged to be in generally sound financial condition by their local Reserve Bank and that are eligible to borrow under the primary credit discount window program will be eligible to participate in TAF auctions.

Each TAF auction will be for a fixed amount, with the rate determined by the auction process (subject to a minimum bid rate). The first TAF auction of $20 billion is scheduled for Monday, December 17, with settlement on Thursday, December 20; this auction will provide 28-day term funds, maturing Thursday, January 17, 2008.

The second auction of up to $20 billion is scheduled for Thursday, December 20, with settlement on Thursday, December 27; this auction will provide 35-day funds, maturing Thursday, January 31, 2008. The third and fourth auctions will be held on January 14 and 28, with settlement on the following Thursdays. The amounts of those auctions will be determined in January. The Federal Reserve may conduct additional auctions in subsequent months, depending in part on evolving market conditions.

Depositories will submit bids through their local Reserve Banks. The minimum rate for the December 17 auction along with other auction details will be announced on Friday, December 14. Noncompetitive tenders may be accepted beginning with the third auction. The results of the first auction will be announced at 10 a.m. Eastern Time on December 19. The schedule for releasing the results of later auctions will be determined subsequently. Detailed terms of the auction and summary auction results will be provided by the Board of Governors of the Federal Reserve System.

See the Board's press release for full details.

Press release offsite