March 24, 2020 / 9:59 PM / 14 days ago

U.S. Fed hires BlackRock to help execute mortgage-backed securities purchases

WASHINGTON (Reuters) - The U.S. Federal Reserve has hired asset management giant BlackRock to help it execute the purchase of commercial mortgage-backed securities announced this week as part of the central bank’s aggressive efforts to shore up the U.S. economy.

FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo

Over the past week, the central bank has released a volley of measures to boost liquidity in the financial markets and get cash into the hands of small businesses and consumers amid growing worries the coronavirus outbreak would wreak economic havoc across the country.

As part of that program, the Fed has committed to purchasing billion of dollars of commercial mortgage-backed securities (CMBS) secured primarily by multifamily home mortgages guaranteed by housing giants Fannie Mae and Freddie Mac.

The New York Fed said in a statement on Tuesday it had retained BlackRock Financial Markets Advisory to purchase the assets on the Fed’s behalf from primary dealers in the market.

“BlackRock was selected on a short-term basis to serve as an investment manager after considering their expertise in trading and analyzing agency CMBS in the secondary market, and robust operational and technological capabilities,” the Fed said.

BlackRock said it would release more details on the terms and conditions of the purchasing program in due course and would not discuss any purchases with dealers until then.

Earlier on Tuesday, the Fed also told large banks it still expected them to submit the capital plans for the central bank’s annual stress tests by the original April 6 deadline,

In said those plans will be used to “monitor how firms are managing their capital in the current environment.”

At the same time, the Fed said it will give banks more time to address non-critical examiner issues and will temporarily reduce examination activities at banks.

Instead, the Fed is currently focused on bank outreach to make sure firms can manage the challenge and risks brought on by the pandemic.

“The Board recognizes that the current situation is significantly affecting areas of the country in different ways and will work with financial institutions to understand the specific issues they are facing,” the Fed said in a separate statement.

Its supervisory adjustments mark the latest move by U.S. bank regulators to reassure banks that the Fed wants them to continue lending through the economic downturn, and that it will not pursue them for regulatory foot-fault.

Earlier in March, European Union banking regulators delayed this year’s stress test and eased some capital rules to avoid lenders turning off the taps over the coronavirus threat.

The Fed is currently scheduled to assess the capital plans for 34 large banks, with results published on June 30.

Reporting by Pete Schroeder and Michelle Price; additional reporting by Alden Bentley; Editing by Chris Reese, Sonya Hepinstall and Lincoln Feast.

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