Board of Governors of the Federal Reserve System

Federal Reserve Banks Combined Quarterly Financial Report Unaudited - March 31, 2020

Abbreviations

Combined Quarterly
Financial Statements

Combined statements of condition

Combined statements of operations

Combined statements of changes in capital

Supplemental Financial Information

(1) Loans

Loans to Depository Institutions

The Reserve Banks offer primary, secondary, and seasonal loans to eligible borrowers (depository institutions that maintain reservable transaction accounts or nonpersonal time deposits and have established discount window borrowing privileges). Primary and secondary loans are extended on a short-term basis, typically overnight, whereas seasonal loans may be extended for a period of up to nine months.

Other Loans, Net

The Primary Dealer Credit Facility (PDCF) was approved by the Board of Governors on March 17, 2020, and began operations on March 20, 2020. The PDCF offers primary dealers overnight and term funding with maturities of up to 90 days. The Money Market Mutual Fund Liquidity Facility (MMLF) was approved by the Board of Governors on March 18, 2020, and began operations on March 23, 2020. The MMLF offers eligible financial institutions loans secured by high-quality assets purchased by the financial institution from money market mutual funds.

The amounts outstanding at March 31, 2020, and December 31, 2019, for loans to depository institutions and other loans, net, were as follows (in millions):

Table 1. Loans to depository institutions and other loans, net

The remaining maturity distribution of loans to depository institutions and other loans, net, outstanding as of March 31, 2020, and December 31, 2019, was as follows:

Table 2. Maturity distribution of loans to depository institutions and other loans, net

At March 31, 2020, and December 31, 2019, the Reserve Banks did not have any loans that were impaired, restructured, past due, or on non-accrual status, and no allowance for loan losses was required. There were no impaired loans during the period ended March 31, 2020, and year ended December 31, 2019.

(2) System Open Market Account (SOMA) Holdings

Treasury securities, federal agency and government-sponsored enterprise (GSE) mortgage-backed securities (MBS), and GSE debt securities are reported at amortized cost in the Combined statements of condition. SOMA portfolio holdings at March 31, 2020, and December 31, 2019, were as follows:

Table 3. Domestic SOMA portfolio holdings

The following table provides additional information on the amortized cost and fair values of the federal agency and GSE MBS portfolio at March 31, 2020, and December 31, 2019:

Table 4. Detail of federal agency and GSE MBS holdings—distribution of MBS holdings by coupon rate

The Federal Reserve Bank of New York (FRBNY) may engage in purchases of securities under agreements to resell (repurchase agreements) with primary dealers.

The FRBNY may also engage in sales of securities under agreements to repurchase (reverse repurchase agreements) with primary dealers and with a set of expanded counterparties that includes banks, savings associations, GSEs, and domestic money market funds (primary dealer and expanded counterparties reverse repurchase agreements). Reverse repurchase agreements may also be executed with foreign official and international account holders as part of a service offering. Financial information related to reverse repurchase agreements at March 31, 2020, and December 31, 2019, was as follows:

Table 5. Repurchase Agreements and Reverse Repurchase Agreements

The remaining maturity distribution of Treasury securities, federal agency and GSE MBS bought outright, GSE debt securities, repurchase agreements, and reverse repurchase agreements at March 31, 2020, and December 31, 2019, was as follows:

Table 6. Maturity distribution of domestic SOMA portfolio securities, securities purchased under agreements to resell, and securities sold under agreements to repurchase

Federal agency and GSE residential MBS (RMBS) and commercial MBS (CMBS) are reported at stated maturity in table 6 above. The estimated weighted-average lives of the federal agency and GSE RMBS and CMBS differ from the stated maturity in table 6 primarily because these estimated weighted-average lives factor in scheduled payments and prepayment assumptions. The estimated weighted-average life of federal agency and GSE RMBS was approximately 3.6 years and 5.3 years as of March 31, 2020, and December 31, 2019, respectively. The estimated weighted-average life of the federal agency and GSE CMBS was approximately 8.5 years as of March 31, 2020.

Information about transactions related to Treasury securities, federal agency and GSE MBS, and GSE debt securities held in the SOMA during the three months ended March 31, 2020, and during the year ended December 31, 2019, is summarized as follows:

Table 7a. Domestic portfolio transactions of SOMA securities—bills, notes, and bonds

Table 7b. Domestic portfolio transactions of SOMA securities—residential and commercial MBS and GSE debt securities

Information about foreign currency denominated investments recorded at amortized cost and valued at foreign currency market exchange rates held in the SOMA at March 31, 2020, and December 31, 2019, was as follows:

Table 8. Foreign currency denominated investments

The remaining maturity distribution of foreign currency denominated investments at March 31, 2020, and December 31, 2019, was as follows:

Table 9. Maturity distribution of foreign currency denominated investments

At March 31, 2020, and December 31, 2019, the fair value of foreign currency denominated investments held in the SOMA was $20,686 million and $20,829 million, respectively.

Because of the global character of bank funding markets, the Federal Reserve has at times coordinated with other central banks to provide liquidity. The Federal Open Market Committee (FOMC) authorized and directed the FRBNY to maintain U.S. dollar liquidity swap arrangements and foreign currency liquidity swap arrangements with foreign central banks. As of December 31, 2019, and March 31, 2020, the FRBNY had standing U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank. On March 19, 2020, the FRBNY entered into temporary U.S. dollar liquidity swap arrangements to be in place for at least six months with the Reserve Bank of Australia, the Banco Central do Brasil, the Danmarks Nationalbank (Denmark), the Bank of Korea, the Banco de Mexico, the Norges Bank (Norway), the Reserve Bank of New Zealand, the Monetary Authority of Singapore, and the Sveriges Riksbank (Sweden). The FRBNY holds amounts outstanding under these swap lines in the SOMA.

The remaining maturity distribution of U.S. dollar liquidity swaps at March 31, 2020, and December 31, 2019, was as follows:

Table 10. Maturity distribution of liquidity swaps

The following table presents the realized gains and the change in the cumulative unrealized gains (losses) related to SOMA domestic securities holdings during the periods ended March 31, 2020, and March 31, 2019:

Table 11. Realized gains and change in unrealized gains (losses) position

(3) Federal Reserve Notes

Federal Reserve notes are the circulating currency of the United States. These notes, which are identified as issued to a specific Reserve Bank, must be fully collateralized. All of the Reserve Banks' assets are eligible to be pledged as collateral. At March 31, 2020, and December 31, 2019, all Federal Reserve notes, net, were fully collateralized.

(4) Depository Institution Deposits

Depository institutions' deposits primarily represent the reserve and service-related balances in the accounts that depository institutions hold at the Reserve Banks. Required reserve balances are those that a depository institution must hold to satisfy its reserve requirement. Reserve requirements are the amount of funds that a depository institution must hold in reserve against specified deposit liabilities. Excess reserves are those held by the depository institutions in excess of their required reserve balances.

(5) Treasury Deposits

The Treasury holds deposits at the Reserve Banks in a general account pursuant to the Reserve Banks' role as fiscal agent and depositary of the United States.

(6) Capital and Surplus

The Federal Reserve Act (FRA) requires that each member bank subscribe to the capital stock of the Reserve Bank in an amount equal to 6 percent of the capital and surplus of the member bank. These shares have a par value of $100, and may not be transferred or hypothecated. As a member bank's capital and surplus changes, its holdings of Reserve Bank stock must be adjusted. Currently, only one-half of the subscription is paid in, and the remainder is subject to call. A member bank is liable for Reserve Bank liabilities up to twice the par value of stock subscribed by it.

The FRA requires each Reserve Bank to pay each member bank an annual dividend on paid in capital stock. By law member banks with more than $10 billion of total consolidated assets, adjusted annually for inflation, receive a dividend on paid in capital stock equal to the smaller of 6 percent or the rate equal to the high yield of the 10-year Treasury note auctioned at the last auction held prior to the payment of the dividend. Member banks with $10 billion or less of total consolidated assets, adjusted annually for inflation, receive a dividend on paid in capital stock equal to 6 percent. The dividend is paid semiannually and is cumulative.

The FRA limits aggregate Reserve Bank surplus to $6.825 billion.

(7) Income and Expense

(A) Loans to Depository Institutions and Other Loans, Net

Interest income on primary, secondary, and seasonal credit is accrued using the applicable rate established at least every 14 days by the Reserve Banks' boards of directors, subject to review and determination by the Board of Governors. Interest income on advances made under the MMLF and PDCF is accrued using the applicable rate as outlined by the term sheets of the respective programs.

Supplemental information on interest income on loans to depository institutions and other loans, net, is as follows:

Table 12. Interest income on loans to depository institutions and other loans, net

(B) SOMA Holdings

The amount reported as interest income on SOMA portfolio holdings includes the amortization of premiums and discounts. Supplemental information on interest income on SOMA portfolio holdings is as follows:

Table 13. Interest income on SOMA portfolio

Supplemental information on interest expense on securities sold under agreement to repurchase (reverse repurchase agreements) is as follows:

Table 14. Interest expense on securities sold under agreement to repurchase

(C) Depository Institution Deposits

The Reserve Banks pay interest to depository institutions on qualifying balances held at the Reserve Banks. The interest rates paid on required reserve balances and excess balances are determined by the Board of Governors, based on a FOMC-established target range for the federal funds rate.

The Reserve Banks also offer term deposits through the Term Deposit Facility, and all depository institutions that are eligible to receive interest on their balances at the Reserve Banks may participate in the term deposit program. The interest rate paid on these deposits is determined by auction.

(D) Operating Expenses

The Federal Reserve Banks have established procedures for budgetary control and monitoring of operating expenses as part of their efforts to ensure appropriate stewardship and accountability. Reserve Bank and Board governance bodies provide budget guidance for major functional areas for the upcoming budget year. The Board's Committee on Federal Reserve Bank Affairs (BAC) reviews the Banks' budgets and the BAC chair submits the budgets to Board members for review and final action. Throughout the year, Reserve Bank and Board staffs monitor actual performance and compare it with approved budgets and forecasts.

Certain amounts relating to the prior year have been reclassified in the Combined statements of operations to conform to the current year presentation. In accordance with Financial Accounting Standards Board Accounting Standards Update 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, $10 million previously reported as "Operating expenses: System pension service cost" have been reclassified as "Operating expenses: Salaries and benefits" for the three months ended March 31, 2019.

Additional information regarding Reserve Bank operating expenses is available each year in the Annual Report of the Board of Governors of the Federal Reserve System at https://www.federalreserve.gov/publications/annual-report.htm, and on the Audit webpage of the Board's website at https://www.federalreserve.gov/regreform/audit.htm.