Operating Policy
Statement on Incorporation of Selected Deposits into the Overnight Bank Funding Rate
April 17, 2019

The Federal Reserve Bank of New York (New York Fed) will incorporate selected deposits into the daily calculation of the Overnight Bank Funding Rate (OBFR) from May 2, 2019, reflecting underlying transactions from May 1, 2019. Feedback received in response to the request for public comment was supportive of the proposal to do so. The New York Fed believes that the incorporation of selected deposits into the OBFR, by capturing transactions economically-similar to the types of federal funds and Eurodollar transactions that are currently included, will achieve a more robust measure of wholesale, unsecured, overnight bank funding costs. Since the New York Fed began collecting data on selected deposits in October 2018, daily overnight transaction volumes in selected deposits have averaged roughly $60 billion, which will represent approximately one-third of the revised OBFR’s transaction base. The volume-weighted median of the rates on selected deposit transactions is typically very close to that of Eurodollar transactions, underscoring the economic similarity of the two types of transactions.¬† Historical observations suggest that, when selected deposits are incorporated, the changes to the OBFR’s daily value have been infrequent and minimal relative to what the OBFR would have been otherwise.

All other relevant administrative matters regarding the OBFR will remain unchanged. As noted in the request for public comment, the OBFR will continue to be calculated as a volume-weighted median, but of a broader set of transactions including overnight federal funds, Eurodollar, and selected deposit borrowings as reported in the FR 2420 report. The New York Fed will continue to publish the OBFR and the Effective Federal Funds Rate (EFFR) at approximately 9:00 a.m. Eastern Time, along with accompanying statistics, including the dollar amount of transactions used to calculate each rate—rounded to the nearest billion—and the volume-weighted 1st, 25th, 75th, and 99th percentile rates.

In the coming weeks, the New York Fed plans to publish an update to the continuous series of data on selected deposits and their impact on the OBFR extending from the revision of the FR2420 on October 1, 2018 through the end of April 2019.

The inclusion of selected deposits in the OBFR will not affect the OBFR’s compliance with the IOSCO Principles for Financial Benchmarks, and the New York Fed will update its IOSCO Statement of Compliance later this year to reflect the inclusion of the new data. For more information on the publication of the OBFR, please consult Additional Information about the Effective Federal Funds Rate and Overnight Bank Funding Rate.

Selected Deposit Data

Feedback on Proposed Change to the Overnight Bank Funding Rate