How does the March 2009 announcement regarding changes to the lendable values for group deposited pledged loans comport with the Board of Governors August 2007 statement which indicated that existing margins will be maintained?
The lendable value for loans that are group deposited incorporates both a margin component as well as a modeled market price component, the latter of which is based on assumptions regarding average risk characteristics of the pledged loans. The April 2009 changes to lendable values for group deposited loans were made to reflect changes in the modeled market price component of the lendable values of certain loan types. Why is the Federal Reserve implementing changes to lendable values at this time? Pursuant to section 201.3(a)(2) of Regulation A, an advance to a depository institution must be secured to the satisfaction of the Reserve Bank that makes the advance. Based on regular and ongoing analysis of published margins and lendable values that incorporates market information, changes are deemed necessary at this time to ensure that advances are being secured to the satisfaction of Reserve Banks.
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