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Economic Brief

March 24, 2021

Richmond Fed Research Explores Discount Window Lending in ‘Normal’ Times

Newly available data show that larger banks and less-liquid banks were more inclined to borrow from the Federal Reserve’s discount window in 2010 through 2017, according to the Richmond Fed’s latest Economic Brief.

Understanding how banks use the discount window during “normal” times helps economists assess the value of this longstanding institution. The paper concludes that bank reserves are a strong substitute for discount window borrowing. Even after the researchers controlled for reserve holdings and other bank-level characteristics, larger banks remain more likely to tap the discount window.

The Richmond Fed’s Economic Brief series provides essays on economic issues and trends. Sign up to receive an email notification when a new essay is posted.


As part of our nation’s central bank, the Richmond Fed is one of 12 regional Reserve Banks working together with the Board of Governors to support a healthy economy and deliver on our mission to foster economic stability and strength. We connect with community and business leaders across the Fifth Federal Reserve District — including the Carolinas, District of Columbia, Maryland, Virginia, and most of West Virginia — to monitor economic conditions, address issues facing our communities, and share this information with monetary and financial policymakers. We also work with banks to ensure they are operating safely and soundly, supply financial institutions with currency that’s fit for distribution, and provide a safe and efficient way to transfer funds through our nation’s payments system.

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