The FIMA Repo Facility
The Foreign and International Monetary Authorities (FIMA) Repo Facility allows foreign central banks and international monetary authorities that maintain accounts at the New York Fed to temporarily exchange their Treasury holdings for U.S. dollar reserves — essentially repo-ing Treasuries overnight with the Fed. Established permanently in 2021 (after a temporary version in 2020), the facility was designed to reduce dollar funding stress during crises by preventing foreign institutions from dumping Treasuries in the open market to raise dollar liquidity.
By providing a reliable dollar liquidity backstop against Treasury collateral, the FIMA facility makes Treasury securities more liquid from the perspective of foreign central banks. This matters for the Fed's balance sheet: if foreign official holders view Treasuries as reliably liquid — because they can always repo them at the Fed — they have less reason to demand dollar reserves as a separate safety stock.
Current Limitations
The facility currently has three significant limitations. First, eligibility is restricted to central banks and official monetary authorities — sovereign wealth funds, supranational institutions, and other quasi-sovereign entities cannot access it. Second, all transactions are overnight, meaning counterparties face rollover risk and cannot use the facility for term funding needs. Third, per-counterparty usage limits constrain the amount any single institution can borrow, potentially capping the facility's effectiveness during severe stress events.
The Policy Option
Three expansions are proposed. First, broaden eligibility to sovereign wealth funds and major quasi-sovereign institutions, expanding the range of foreign entities that can treat Treasuries as a reliable dollar liquidity source. Second, extend maximum terms from overnight to 84 days (one quarter), allowing term borrowing against Treasury collateral and eliminating rollover risk as a constraint on foreign Treasury holdings. Third, raise or eliminate per-counterparty limits to ensure the facility functions as an unconstrained backstop during stress.
These expansions directly reduce foreign official demand for precautionary dollar reserves. Currently, foreign central banks and SWFs hold dollar reserves partly as a buffer against the inability to monetise their Treasury portfolios quickly. An expanded FIMA facility would substitute for a portion of this precautionary reserve demand.
Driven by reduction in foreign official precautionary reserve demand. High uncertainty: depends on take-up under expanded eligibility, which is unobservable ex ante.
Policy Coordination Requirements
Expanding the FIMA facility requires coordination with the Treasury Department, which must concur on changes to the facility's scope given its implications for U.S. international financial policy. There may also be political sensitivities around extending dollar liquidity facilities to sovereign wealth funds, which are sometimes viewed with suspicion by Congress and the public. The paper notes these political dimensions without recommending a specific expansion path.