Banks tap record liquidity from New York Fed's Standing Repo Facility

By Michael S. Derby Dec 31 (Reuters) – Eligible financial firms borrowed a record amount of cash from the Federal Reserve Bank of New York’s Standing Repo Facility Wednesday, as banks and others managed liquidity needs on the final trading day of 2025. The financial firms borrowed $74.6 billion from the central bank, in loans collateralized with $31.5 billion in Treasury bonds and $43.1 billion in mortgage-backed securities. The borrowing on Wednesday compared to the prior peak of $50.35 billion seen on October 31, which was a quarter-end. While there is always uncertainty about the full scope of liquidity needs around key calendar dates, the borrowing seen thus far on Wednesday was in line with some market estimates. The New York Fed will hold a second repo operation at 1:45 p.m. ET, as well as an operation to take in cash via its reverse repo facility. Year-end often increases liquidity needs for some financial institutions as lenders pull back for a variety of reasons. Most expect any surge in borrowing today will dissipate over coming days as more normal trading conditions reassert themselves. The New York Fed has been encouraging eligible financial firms to actively use the Standing Repo Facility after banks and others had shown hesitancy. Roberto Perli, who manages the implementation of monetary policy at the New York Fed, said in November that “our counterparties participated in large scale in the repo operations that the Federal Reserve offered in the past; if it makes economic sense, there is no reason why sizeable participation cannot take place” in the two daily Standing Repo Facility operations. (Reporting by Michael S. Derby; Editing by Chizu Nomiyama )

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