Fed to test its Term Deposit Facility Aug. 10

The Federal Reserve will test the Term Deposit Facility (TDF), allowing for eligible institutions to remain familiar with term deposit procedures. On Thursday (Aug. 10), the Fed will provide for a floating-rate offering of term deposits with an early withdrawal feature through its TDF.

The test has “no implications for the near-term conduct of monetary policy,” according to the Fed. It plans to test the TDF quarterly in 2017.

In the Aug. 10 test, the Fed “will offer seven-day term deposits with a rate set equal to the sum of the interest rate paid on excess reserves plus a fixed spread of 1 basis point. The maximum tender amount per institution will be ($1 billion). The operation window will be open from 10 a.m. EDT to 12:30 p.m. EDT, and awarded deposits will settle the same day the operation is executed.”

Penalty for early withdrawal includes the “forfeiture of all interest on the term deposit plus an additional fee of 0.75% at an annual rate applied to the principal over the entire term of the deposit,” according to the Fed. “Requests for early withdrawal must be made between 10 a.m. EDT and 12 p.m. EDT.”

Institutions can submit tenders by accessing the Term Deposit Facility application between the opening and closing times.

FED SEEKS COMMENT
The Federal Reserve is seeking comment on a corporate governance proposal to improve the effectiveness of boards of directors. The Fed looks to refocus its oversight expectations for the largest firms’ boards of directors on their responsibilities.

The corporate governance proposal “identifies the attributes of effective boards of directors, such as setting a clear and consistent strategic direction for the firm as a whole, supporting independent risk management and holding the management of the firm accountable. Second, it clarifies that for all supervised firms, most supervisory findings should be communicated to the firm’s senior management for corrective action, rather than to its board of directors. And third, the proposal identifies existing supervisory expectations for boards of directors that could be eliminated or revised,” according the Fed.

Comments will be accepted for 60 days.