The Federal Reserve's Balance Sheet Size and 'Other Deposits': Some Financial Stability Considerations (Chicago Fed Letter)

Summary

• CCP deposits typically make up 80% to 90% of the Fed liability category 'deposits with F.R. Banks, other than reserve balances'.p.2
• CCP deposit balances have recently hovered around their highest levels on record, at around $250 billion as of 2026:Q2.p.2
• Six of the eight designated financial market utilities (DFMUs) are CCPs, and each has deposit accounts with a Federal Reserve Bank.p.3
• The ECB updated its CCP remuneration policy in April 2024, moving from the deposit facility rate to the euro short-term rate (€STR).p.4
• A decline in CCP deposits at the Fed may increase wrong-way risk for individual CCPs, which can become systemic in times of heightened market stress.p.5

Key insights

1. Reducing CCP deposits could shrink the Fed balance sheet but would also create financial stability implications such as wrong-way risk.p.1
2. CCP demand for Fed master account balances is influenced by the remuneration rate, limits on account size and the availability of alternative liquidity tools.p.1
3. If total assets are unchanged, a change in CCP deposits produces a one-for-one inverse change in reserves held by banks.p.2
4. A sustained decline in CCP deposits would permanently raise the reserve cushion, giving the Fed capacity to shrink its assets while keeping an ample reserves regime.p.3
5. Drivers of CCP deposit levels include open interest, each CCP's margin requirements, and the margin and default fund allocation preferences of CCPs and their clearing members.p.3
6. In a 2025 survey of 30 CCPs, central banks did not use a uniform approach to CCP deposits, with remuneration typically equal to or less favorable than the rate paid on bank reserves.p.4
7. One policy option is to cap DFMU account balances, which Title VIII of the Dodd–Frank Act allows through limitations, restrictions or other requirements.p.4
8. International standards call for money settlements in central bank money where practical, because commercial bank money carries credit and liquidity risks.p.5