Discount window

The discount window is an instrument of monetary policy (usually controlled by central banks) that allows eligible institutions to borrow money from the central bank, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions.

Because of this, it is a relatively unimportant factor in the control of the money supply and is only taken advantage of at large volume during emergencies.

[1] After the 11 September 2001 attacks, as the volume of borrowing requests increased dramatically, lending to banks through the discount window totaled about $46 billion, more than 200 times the daily average for the previous month.

On August 17, 2007, the Board of Governors of the Federal Reserve announced[4] a temporary change to primary credit lending terms.

On March 16, 2008, concurrent with measures to rescue Bear Stearns from insolvency and to stem further institutional bank runs, the Federal Reserve announced[5] significant and temporary changes to primary credit lending terms.

The Wall Street Journal reported in November 2019 that banks were "desperate to avoid the stigma attached to accessing the window" and were "hoarding cash at levels well above what regulators require".

[citation needed] Counterparties must have collateral for the funds they receive from the Marginal Lending Facility and will be charged the overnight rate set by the ECBS.