Bank Term Funding Program
The Bank Term Funding Program (BTFP) is a loan program for banks operated by the United States Federal Reserve since 2023,[1][2] The Federal Reserve established BTFP to offer loans of up to one year to eligible depository institutions pledging qualifying assets as collateral, as a response to help stabilize the banking industry after the 2023 United States banking crisis.[3] It is set to expire in March 2024.
History
Program creation
In response to the bank failures of March in relation to the 2023 United States banking crisis, in 2023 the United States government took extraordinary measures to mitigate fallout across the banking sector.[1] On March 12, Federal Reserve created the Bank Term Funding Program (BTFP), an emergency lending program providing loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions that pledge U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral.[2][3][4]
Design and functionality
The program is designed to provide liquidity to financial institutions, following the collapse of Silicon Valley Bank and other bank failures, and to reduce the risks associated with current unrealized losses in the U.S. banking system that totaled over $600 billion at the time of the program's launch.[5] Funded through the Deposit Insurance Fund,[6] the program offers loans of up to one year to eligible borrowers who pledge as collateral certain types of securities including U.S. Treasuries, agency debt, and mortgage-backed securities.[7]
Loan increases and expiration
The collateral is to be valued at par instead of open-market value, so a bank can borrow on asset values that have not been impaired by a series of interest rate hikes since 2022. The Federal Reserve also eased conditions at its discount window. The Department of the Treasury will make available up to $25 billion from its Exchange Stabilization Fund as a backstop for the program.[8]
In January 2024, the Federal Reserve said it would let the program expire on March 11, as scheduled. The Federal Reserve also raised the interest rate on new loans from the Bank Term Funding Program (BTFP). It also said loans outstanding in the program as of January 17, 2024 were $161.5 billion.[9]
References
- ^ a b Ensign, Rachel Louise; Benoit, David (March 12, 2023). "Signature Bank Is Shut by Regulators After SVB Failure". The Wall Street Journal. Archived from the original on March 13, 2023. Retrieved March 12, 2023.
- ^ a b "Federal Reserve Board announces it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors". Federal Reserve. March 12, 2023. Archived from the original on March 12, 2023. Retrieved March 12, 2023.
This article incorporates text from this source, which is in the public domain.
- ^ a b Stein, Jeff; Lynch, David J.; Romm, Tony; Pager, Tyler (March 12, 2023). "U.S. says 'all' deposits at failed bank will be available Monday". The Washington Post. Archived from the original on March 12, 2023. Retrieved March 12, 2023.
- ^ Eisen, Ben (March 12, 2023). "Meet the BTFP, the Fed's 2023 Crisis Facility". The Wall Street Journal. Archived from the original on March 12, 2023. Retrieved March 12, 2023.
- ^ Cox, Jeff (March 12, 2023). "U.S. government steps in and says people with funds deposited at SVB will be able to access their money". CNBC. Archived from the original on March 12, 2023. Retrieved March 12, 2023.
- ^ Smialek, Jeanna; Rappeport, Alan (March 12, 2023). "Regulators Race to Contain Silicon Valley Bank Fallout and Close Signature Bank". The New York Times. Archived from the original on March 13, 2023. Retrieved March 12, 2023.
- ^ Smith, Colby; Politi, James; Fontanella-Khan, James; Masters, Brooke (March 12, 2023). "Federal Reserve announces emergency lending facility to shore up US banks". Financial Times. Archived from the original on March 13, 2023. Retrieved March 13, 2023.
- ^ Burns, Dan (March 12, 2023). "Factbox: Key elements of Fed's new US bank funding program". Reuters. Archived from the original on March 13, 2023. Retrieved March 13, 2023.
- ^ Schroder, Pete (25 January 2024). "Fed to allow emergency bank lending program to expire on March 11". Reuters. Retrieved 30 January 2024.