The Federal Reserve Board announced on March 12, 2023, the launch of the Bank Term Funding Program (“BTFP”), an emergency loan program intended to inject an estimated $2 trillion into the US banking system.[0] The program was created to ease the liquidity crunch caused by the recent collapse of three major US banks: Silvergate, Silicon Valley bank, and Signature bank.
JP Morgan Chase & Co, the financial services company, stated that the Fed’s emergency funding program will help alleviate the current liquidity crisis.[1] The BTFP offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral.[2] Furthermore, the Federal Reserve has provided credit protection by making available up to $25 billion from the Exchange Stabilization Fund to the Federal Reserve Banks in connection with the BTFP.[3]
JP Morgan strategists said that the BTFP should be able to inject enough reserves into the banking system to reduce reserve scarcity and reverse the tightening that has taken place over the past year.[4] The Fed also said that it plans to publish figures weekly in the same balance-sheet statement that it uses to reveal uptake of funding from the window.[5]
The discount window, which remains open and available, also provides liquidity against a wide range of collateral.[2] The discount window will apply the same margins used for the securities eligible for the BTFP.[6] This increase in lendable value at the window will help ensure banks have the ability to meet the needs of all their depositors and support the ongoing provision of money and credit to the economy.
0. “Fed’s BTFP May Administer $2 Trillion to US Banks, States JP Morgan By CoinEdition” Investing.com, 16 Mar. 2023, https://www.investing.com/news/cryptocurrency-news/feds-btfp-may-administer-2-trillion-to-us-banks-states-jp-morgan-3031892
1. “FED to Inject $2 Trillion Funds– Inflation Gets Out of Hand?” The Coin Republic, 16 Mar. 2023, https://www.thecoinrepublic.com/2023/03/16/fed-to-inject-2-trillion-funds-inflation-gets-out-of-hand/
2. “U.S. Quasi-Sovereign Wealth Fund Known as the Exchange Stabilization Fund to Provide Backstop for Bank Term Funding Program” Sovereign Wealth Fund Institute, 13 Mar. 2023, https://www.swfinstitute.org/news/96119/u-s-quasi-sovereign-wealth-fund-known-as-the-exchange-stabilization-fund-to-provide-backstop-for-bank-term-funding-program
3. “Recent Bank Failures and Fallouts Addressed by US Agencies” The National Law Review, 15 Mar. 2023, https://www.natlawreview.com/article/us-government-agencies-address-recent-bank-failures-and-fallout
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. “Federal Reserve Launches New Bank Term Facility Program; First Republic Bank Receives Private Sector Liquidity” Lexology, 14 Mar. 2023, https://www.lexology.com/library/detail.aspx?g=f8ccfc5a-6a02-4692-ad76-52aead7d4028