WASHINGTON: Higher charges placed on banks that lend overnight funds to the Federal Reserve are having "an anticipated positive effect" of making long-term borrowing relatively more attractive for banks, the Federal Deposit Insurance Corp said on Tuesday.
The FDIC introduced the higher fees as called for in last year's Dodd-Frank financial reform law. The higher charge has led some companies to step out of the short-term lending markets, exacerbating an already low supply of Treasury bills used to back borrowing.
The FDIC said in a statement to Reuters that market participants were given plenty of time to consider the rule before it went into effect, and that the change may have a positive impact on credit availability as resources are directed elsewhere.
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