Fed Announces New Term Deposit Facility Tests

The Federal Reserve announced on Friday that it will conduct a new round of testing of its Term Deposit Facility, in an effort to help banks become familiar with how it works.

The central bank created the TDF in response to the financial crisis to manage reserve balances held by depository institutions.

"These operations are designed to ensure the operational readiness of the TDF," the Fed said in a press release.

The Fed will run eight consecutive tests on the first day of each business week beginning on May 19.

During the first four weeks, the maximum award will gradually increase to $10 billion, with an interest rate of 26 basis points. During the final four weeks, the interest rate will increase gradually up to a maximum of 30 basis points.

Details on the weekly tests will be posted on the Federal Reserve website.

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