Common Borrowing Situations

The new discount window programs offer an enhanced opportunity for eligible depository institutions seeking an efficient solution to meet unexpected, short- term funding needs.

Likely Situations for Borrowing Primary Credit
Generally, there are no restrictions on borrowers’ use of primary credit. Here are some examples of common borrowing situations:
•	Tight money markets or undue market volatility
•	Preventing an overnight overdraft
•	Meeting a need for backup funding, including a short-term liquidity demand that may arise from unexpected deposit withdrawals or a spike in loan demand
•	Arbitrage opportunities
Appropriate Situations for Borrowing Secondary Credit
Secondary credit is subject to a higher level of lending administration than primary credit. Examples of appropriate uses of secondary credit include:
•	Tight money markets or undue market volatility
•	Addressing an overnight overdraft
•	Meeting a need for backup funding, including a short-term liquidity demand
•	Inability to obtain funding from normal sources
•	To assist the primary regulator in prompt closure of a troubled institution
Inappropriate Situations for Borrowing Secondary Credit
•	Arbitrage opportunities
•	To facilitate balance sheet expansion