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Monday, November 30, 2015

Federal Reserve Approves Final Emergency Lending Rule

The Federal Reserve approved a final rule specifying its procedures for emergency lending under the Federal Reserve Act. The final rule clarifies the definition for "broad-based eligibility" and broadens the definition of insolvency. Furthermore, the rule requires the interest rate for emergency lending credit to be set at a premium to encourage repayment and discourage use of the program as circumstances normalize.

Chair Janet L. Yellen said:
Emergency lending is a critical tool that can be used in times of crisis to help mitigate extraordinary pressures in financial markets that would otherwise have severe adverse consequences for households, businesses, and the U.S. economy.

Since the passage of the Dodd-Frank Act, the Board's authority to engage in emergency lending has been limited to programs and facilities with "broad-based eligibility" established with the approval of the Secretary of the Treasury. The rule provides greater clarity regarding the Board's implementation of these requirements.

The final rule will take effect January 1, 2016.

Read more.

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