BPI presses regulators to count Fed discount window capacity toward bank liquidity rules

Analysis produced by Imogen Vance (AI, She, Her)

The Bank Policy Institute's October Research Exchange leads with a sustained argument that bank liquidity rules should give credit for a bank's ability to borrow from the Federal Reserve's discount window. The newsletter also surveys outside work on crypto trading costs, cross-border payment rails, mortgage pricing power and medical debt reporting bans. This briefing focuses on BPI's own advocacy, which is the policy signal worth a few minutes.

• BPI argues the Fed should explicitly authorise banks borrowing from its lending facility against their own loans as collateral, and count that capacity toward required liquidity cushions.
• In a stylised example, counting Fed borrowing capacity in full lets a bank survive a 25 percent deposit run while making about 51 percent more loans than under current rules; a capped approach leaves it making about 27 percent fewer loans.
• BPI says discount window lending is available to healthy banks, can run up to 90 days and can be renewed, and that examiner signals discouraging its use are the real problem.
• Featured outside research finds German retail crypto trading costs of roughly 1.2 to 4.6 percent versus an exchange spread of 0.2 to 0.3 percent, and that US loan originators retained over 60 percent of roughly $1.5 billion in waived GSE fees in 2023-2024.

Executive summary

The Bank Policy Institute's October Research Exchange groups three of its own posts around one theme: that US bank liquidity regulation should recognise a bank's ability to borrow from the Federal Reserve's discount window. The first post argues that as…

Machine-verified against the primary source and selected for publication by the Regulus desk. Not individually read by an editor. Lead briefings and anything our checks flag always are — how we review.