After bank failures, Powell says Fed improving discount‑window access and modernizing payments; FedNow uptake slow for small banks
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Summary
Following recent regional bank failures, Fed Chair Powell told the committee the Fed is modernizing the discount window and working to reduce frictions and stigma that deter banks from using it. He also said adoption of FedNow remains slower among smaller institutions due to technology and vendor dependencies.
Members asked Powell about the Federal Reserve’s emergency liquidity tools after the failures of Silicon Valley Bank and others, and about the rollout of the Fed’s instant payments service, FedNow.
Discount window and liquidity tools
Powell said the Fed worked with institutions after recent bank failures and has been reviewing the discount window to make collateral valuation and access quicker in a crisis. “We need to have collateral processes that are very quick and very efficient because they need to be quick and efficient in a crisis,” Powell said. He also noted the challenge of discount‑window stigma, which can make banks reluctant to use the facility even when it is available.
FedNow adoption and small banks
On FedNow, Powell said uptake has been slower than some expected because banks need to invest in systems and often rely on nonbank service providers to connect. He said the Fed encourages service providers that help smaller institutions connect to modern payment rails.
Why it matters: Faster, reliable access to liquidity and modern payment rails affect financial stability, small‑bank operations and small business cash flow. Powell said both operational modernization and stigma reduction are priorities.
Ending: Powell said the Fed will continue to work with banks and service providers to improve discount window processes and to encourage participation in FedNow among small and medium‑sized institutions.
