Central Bank

Federal Reserve Banks authorized to offer term deposits

The Board of Governors of the Federal Reserve System has amended Regulation D (Off-site Link) (Reserve Requirements of Depository Institutions) to authorize Reserve Banks to offer term deposits. The amendments will take effect June 4, 2010. Term deposits will facilitate the conduct of monetary policy by providing a tool that may be used to manage the aggregate quantity of reserve balances held by depository institutions. An increase in term deposits outstanding drains reserve balances because funds to pay for them are removed from the accounts of participating institutions for the life of the term deposit.

What is the Term Deposit Facility?

The Term Deposit Facility is a program through which the Federal Reserve Banks offer interest-bearing term deposits with specific maturity dates to eligible institutions.

How will the Term Deposit Facility operate?

The Federal Reserve Board has authorized up to five small-value offerings of term deposits under the Term Deposit Facility to be conducted in coming months. Term deposits will be made available through an auction-based Term Deposit Facility that will offer fixed quantities of term deposits for a specified maturity date to eligible institutions. Term deposit auctions will generally include both a competitive auction and a noncompetitive tender option. Awards under the competitive auction will be determined by a single-price auction mechanism. All noncompetitive tenders will be accepted in full. The interest rate paid on term deposits through the competitive auction or through noncompetitive tenders will be the highest accepted interest rate in the competitive portion of the offering. Consult the Term Deposit Facility Resource Center for more information on the lifecycle of a term deposit offering from announcement to maturity.

What is an eligible institution?

An eligible institution is one that is permitted by statute to receive interest on balances maintained at the Federal Reserve Banks. Eligible institutions include depository institutions defined in the Federal Reserve Act (banks, savings associations, savings banks and credit unions that are federally insured or eligible to apply for federal insurance), trust companies, Edge and agreement corporations and U.S. agencies and branches of foreign banks.

What steps must an eligible institution take to participate?

An eligible institution must agree to the Term Deposit Agreement by completing its Appendix A and having Appendix A signed by an individual on its Official Authorization List. The eligible institution must send the properly executed Appendix A and all other required forms to the designated Federal Reserve contact. Upon approval of the Federal Reserve, the eligible institution will receive a credential to access the Term Deposit Facility application. The setup steps are posted on the Term Deposit Facility Setup page. Please note the typical time from submission of the necessary forms and agreement to being ready to participate is between 7 and 14 business days.

Where can I get more information?

For more details, including Federal Reserve Board press releases, Federal Register notices and Frequently Asked Questions, visit the Term Deposit Facility Resource Center. Please contact your Term Deposit Facility District Contact with questions about the program. Or, for assistance with setting up participation in the Term Deposit Facility, contact the Federal Reserve’s Customer Contact Center.

Top of Page