We Make Investing Easy

Forecast Future Price Action

Fed Announces Bank Term Funding Program: $164.8 Billion Borrowed by U.S. Banks in One Week


As financial institutions around the world face increasing liquidity constraints due to the collapse of Silicon Valley Bank, the Federal Reserve Board announced on Mar. 12 the creation of a Bank Term Funding Program (BTFP) offering loans of up to one year to “banks, savings associations, credit unions, and other eligible depository institutions.” Banks are able to borrow against their assets “at par” (face value), pledging US Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral.[0] According to the Fed, the program is designed to provide additional liquidity against high-quality securities, and eliminate the need for banks to quickly sell their assets in times of stress.[1]

The new program, along with other backstop facilities offered by the Fed, has already led to a combined borrowing of $164.8 billion by U.S. banks in the last week.[2] Approximately $152.85 billion was taken out of the total sum via the discount window or the usual source of liquidity for banks.[3] In addition, the US Treasury will provide $25 billion in credit protection to the Fed from the Exchange Stabilization Fund.[0]

The Fed has also increased interest rates by 25 basis points in March 2022 for the first time since 2008, and has been in an aggressive quantitative tightening mode since then.[4] Financial institutions and analysts are now awaiting the Fed’s response to the recent bank collapses, with the chair Jerome Powell opening the door to a re-acceleration to a 50 basis-point hike at the Fed’s March 21-22 meeting.

The Fed will report the use of the Bank Term Funding Program on an aggregate basis every week when releasing data on its balance sheet. The figures will be published within the “H.4.1 statistical release titled ‘Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks.'”.[5] With the help of the funding program, banks should be able to access enough reserves to reduce reserve scarcity and reverse the tightening that has taken place over the past year.[6]

0. “Federal Reserve Launches Program to Bail Out Banks” SchiffGold, 13 Mar. 2023, https://schiffgold.com/commentaries/federal-reserve-launches-qe-extra-lite-to-bail-out-banks/

1. “US Fed announces $25B in funding to backstop banks” Cointelegraph, 12 Mar. 2023, https://cointelegraph.com/news/us-fed-announces-25b-in-funding-to-backstop-banks

2. “Banks Rush to Backstop Liquidity With $165 Billion From Fed (2)” Bloomberg Law, 16 Mar. 2023, https://news.bloomberglaw.com/bankruptcy-law/banks-rush-to-backstop-liquidity-borrow-164-8-billion-from-fed

3. “Fed ‘Stands Ready’ to Provide Liquidity to Eligible Institutions” Watcher Guru, 16 Mar. 2023, https://watcher.guru/news/fed-stands-ready-to-provide-liquidity-to-eligible-institutions

4. “Fed May Inject $2 Trillion into US Banking System” BeInCrypto, 16 Mar. 2023, https://beincrypto.com/fed-may-inject-2-trillion-us-banking-system

5. “The Fed could add up to $2 trillion to the economy with its new bank lending program, says JPMorgan” Kitco NEWS, 16 Mar. 2023, https://www.kitco.com/news/2023-03-16/The-Fed-could-inject-2-trillion-into-the-economy-with-its-new-bank-backstop-program-says-JPMorgan.html

6. “‘QE in Another Name’: New Bank Backstop Points to the End of Fed QT” Bloomberg, 13 Mar. 2023, https://www.bloomberg.com/news/articles/2023-03-13/-qe-in-another-name-new-bank-backstop-could-mean-end-of-fed-qt

Forecast Future Price Action
This div height required for enabling the sticky sidebar
Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views : Ad Clicks : Ad Views :