Fed's discount window supports market liquidity, Jefferson says

Sept 22 (Reuters) - Federal Reserve ‌Vice Chair ​Philip ​Jefferson on Tuesday said the US central bank's recent improvements to its emergency lending facility make ‌it easier for financial institutions to use, supporting market ⁠liquidity, financial stability, and monetary policy implementation.

"By providing banks with a ‌reliable source of liquidity, the ‌discount window serves as a shock absorber during periods of market stress by reducing the risk of forced sales ​of Treasury securities," Jefferson said in remarks prepared for delivery to a US Treasury market conference at the ⁠New York Fed.

The Fed has made a number of enhancements to the lending ​facility in recent years, including the introduction of a self-service portal that now handles 60% of ​discount window loans and allows banks ‌to communicate with their regional Fed bank electronically instead of by phone, he said. Banks ⁠say the system makes it easier, faster, and more efficient to borrow from the central bank, he added.

"These improvements, I believe, help ⁠reduce the frictions that may make banks hesitant to use the window ​when they are healthy and reinforce overall confidence in the banking system," Jefferson said. The ability to pledge Treasury collateral even late ‌in the day and receive a loan from the Fed that same day is critical ‌not just for the banks themselves but for maintaining financial ⁠stability as a whole, he ‌added.

Jefferson did not ​address the economic or monetary policy outlook in his prepared remarks.

(Reporting by Ann Saphir; Editing by Paul ‌Simao)

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