Reframing the Fed’s discount window

Funding window incentives and collateralised credit lines could transform bank liquidity in a crisis, argues Bill Nelson

Credit: Risk.net montage

After years in the shadows, the Federal Reserve’s discount window may finally be getting its 15 minutes of fame. 

US banks could overcome their reluctance to be seen at the window if the Fed offers them renewed incentives to borrow, including fresh use of collateralised credit lines.

In March 2023, rapid outflows of deposits from Silicon Valley Bank and Signature Bank demonstrated the importance of banks being prepared to borrow from the window.

SVB had neither the systems nor the collateral in

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