Reuters - The domestic standing repo facility established by the New York Federal Reserve this year could be opened to banks by early next year, said a top Fed official on Thursday.
The U.S. central bank began accepting applications from banks earlier this month for the program, which allows financial firms to borrow cash on an overnight basis, and several banks have already applied, said Lorie Logan, an executive vice president at the New York Fed and manager of the System Open Market Account SOMA Currently, the facility is only open to a group of two dozen Wall Street primary dealers that serve as counterparties for the Fed.
The Fed's temporary repurchase facilities, including one foreign and international monetary authorities and one for local and local backstops, are meant to serve as temporary repurchases and not expected to be used as regularly as other tools used by the central bank to control interest rates, Logan said.
What is in contrast to the overnight repurchase agreement facility of the New York Fed, which gives firms a place to park cash overnight in exchange for a return from an investor. Firms struggling to find a place to invest excess cash have driven the use of the program to record highs in recent months, but Logan said officials are not concerned by the higher usage.
Financial firms might turn to the reverse repo facility less frequently in the future if there is an increase in issuance of securities that would give them more options for investing their cash, she said.