Major borrowers to reduce bank deposits -Fed survey

WASHINGTON, Dec 27 (Reuters) - Wall Street dealers expect hedge funds, insurance companies and other borrowers to reduce deposits at commercial banks when a financial crisis-era deposit insurance program expires at the end of this year, the Federal Reserve said on Thursday.

The U.S. central bank's quarterly survey of senior credit officers found that most expect their clients to get rid of at least some commercial bank deposits in favor of other types of securities such as repurchase agreements, money market funds and Treasury bills.

The survey, which covered the three months from September through November, also found that financial market participants were asking for more funding for mortgage-backed securities, with the mortgage market slowly coming back to life after the financial crisis.

The Fed surveyed 22 institutions to look at the terms and conditions in the securities financing and over-the-counter derivatives markets.

The survey captures conditions at financial intermediaries, while a separate Fed survey of loan officers tracks lending to households and businesses.

(Reporting by Anna Yukhananov; Editing by Leslie Adler)