On July 28, 2023, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the National Credit Union Administration (the “NCUA”) and the Office of the Comptroller of the Currency (together, the “Agencies”) issued an addendum to the Interagency Policy Statement on Funding and Liquidity Risks, originally published in the Federal Register on March 22, 2010 (available here), in response to the recent instances of banks failing in part due to severe liquidity issues earlier this year (the “Addendum”).  The Agencies’ release of the Addendum follows recent statements made by the Chair of the Federal Reserve, Jerome Powell, on July 26, 2023, urging “banks broadly” to be proactive and test more regularly in order to be in a position to expeditiously access the discount window should ever the need to do so arise.

The Addendum advises depository institutions to bolster their operational readiness by regularly testing contingency borrowing lines, identifying potential obstacles inherent to moving and/or posting collateral and reviewing and revising contingency funding plans more frequently as market conditions continue to fluctuate.  Specific to the discount window, the Addendum recommends depository institutions be cognizant of the nuances involved in pledging different types of collateral and encourages depository institutions to familiarize themselves with the discount window operations by periodically conducting small value transactions.  Furthermore, the Addendum stresses the availability of the Central Liquidity Facility for both federal and state-chartered credit unions and highlights the NCUA’s regulatory requirements related to contingency and liquidity funding plans applicable to federally insured credit unions.

The full text of the Addendum can be found here.