The Federal Reserve Board has decided to continue the Federal Credit Union System consolidation program in the event of a global economic downturn, the Fed’s governing board said Tuesday.
The announcement came a day after the Federal Reserve Bank of San Francisco reported a 2.3% increase in its debt-to-equity ratio as it tries to cut down on bad debt.
The Fed also said the program is still expected to reduce interest payments to its customers over the next year.
The move is the first since the program began in February 2015, and follows the announcement of a similar program by the New York Fed in December 2016.
The Federal Deposit Insurance Corp. is also continuing its consolidation program.
The central bank’s rate of interest for the program has been cut to a low of 0.2%.
The move will be welcomed by many Americans who have borrowed heavily to purchase homes and other assets.
It will also give banks and other lenders time to work through the backlog of bad debt that they have accumulated during the global financial crisis.
“While the program’s primary objective remains to maintain stable levels of aggregate and household credit, the program should be complemented by additional capital and liquidity resources, and it is expected that the continued implementation of the program will improve the resilience of the economy,” the Fed said in a statement.
It also noted that it has been reviewing its debt management plans to better prepare for a potential future financial crisis in the United States.
“Given the global nature of the global economic and financial conditions, the ability of the Fed to maintain its long-term outlook for the economy and credit is of critical importance,” the statement said.