European Banks Dominated Use of Fed’s Commercial Paper Program

The U.S. subsidiaries of European financial institutions, led by Zurich-based UBS AG and Brussels- based Dexia SA were among the largest users of a government program to provide emergency short-term funding to U.S. companies and banks during the credit crisis.

Six European banks were among the top 11 companies that sold the most debt overall to the Commercial Paper Funding Facility. They sold a combined $274.1 billion, according to data made public today by the U.S. central bank. UBS sold $74.5 billion, the most among all borrowers. The largest U.S.-based user was insurer American International Group, selling $60.2 billion.

UBS’s figure of $74.5 billion represents the company’s total sales over the life of the program. The bank’s CPFF borrowings peaked at $37.2 billion, an amount the firm rolled over, or re-sold at maturity, once. Other companies rolled over debt in the program as well.

The CPFF was the only Fed program during the crisis that lent directly to non-financial companies, including Peoria, Illinois-based Caterpillar Inc., and Harley-Davidson Inc. in Milwaukee. None of the debt purchased defaulted and the Fed earned $6.1 billion in interest income and usage fees through CPFF, according to the Federal Reserve.

The Fed released details about the commercial paper facility to meet disclosure requirements in the Dodd-Frank financial-oversight law signed by President Barack Obama in July. The central bank has never before revealed specific, transaction-level aspects of its lending.

To contact the editor responsible for this story: John Voskuhl at jvoskuhl@bloomberg.net

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