Fed Governor Bowman Calls for Discount-Window Overhaul to Bolster Bank Liquidity

The Federal Reserve’s discount window allows eligible banks to obtain short-term loans from regional Federal Reserve Banks by pledging collateral, providing a critical liquidity backstop during periods of financial stress. The market has paid closer attention to banks’ ability to access the facility quickly since the regional banking crisis of March 2023. However, banks worry that regulators may view such borrowing as a sign of financial weakness, undermining the facility’s effectiveness.

In July 2026, Fed Vice Chair for Supervision Michelle Bowman called for a fundamental overhaul of the discount window. She proposed incorporating routine testing and actual use of the facility into liquidity rules, while recalibrating bank requirements to reflect a smaller Fed balance sheet. Bowman set no fixed amount or completion deadline. Her focus was on modernizing regulatory objectives alongside monetary policy tools so banks could use the facility routinely before a crisis.