Discount Window Law and Legal Definition

Discount window is a fictitious teller's window at a Federal Reserve Bank which member banks use to borrow money to obtain the required reserves. It is the lending facility of the Federal Reserve through which commercial banks borrow reserves, usually on a short-term basis, to meet temporary shortages of liquidity caused by internal or external disruptions. The rates applied to the financial institutions borrowing at the discount window include the primary credit rate, secondary credit rate and seasonal credit rate. The term, discount window, originated with the practice of sending a bank representative to a reserve bank teller window when a bank needed to borrow money.