Fed announces new emergency program: Additional funding to eligible depository institutions

To support U.S. businesses and households, the U.S. Federal Reserve announced Sunday that it will provide additional funding to eligible depository institutions to help ensure banks have the capacity to meet the needs of all depositors. The move will strengthen the banking system’s ability to protect deposits and ensure the continued supply of money and credit to the economy.

The Fed is prepared to respond to any liquidity stress that may arise.

Additional funding will be provided through the creation of a new Bank Term Financing Program (BTFP) to provide loans for up to one year to banks, savings associations, credit unions and other eligible depository institutions to collateralize U.S. Treasury securities, agency debt and mortgage-backed securities , and other eligible assets as collateral. These assets will be valued at face value. BTFP will be an additional source of liquidity for high-quality securities, eliminating the need for institutions to quickly sell these securities in times of stress.

With the approval of the Minister of Finance, the Ministry of Finance will provide up to US$25 billion from the Exchange Stabilization Fund as support for the BTFP. The Fed does not expect to need to use these support funds.

After receiving recommendations from the Federal Deposit Insurance Corporation (FDIC) and the Board of Governors of the Federal Reserve, Treasury Secretary Yellen, in consultation with the President, approved actions that would allow the FDIC to complete its resolution on SVB and Signature Banks within a short period of time. A means of adequately protecting all depositors, both insured and uninsured. These actions will reduce stress across the financial system, support financial stability, and minimize the impact on businesses, households, taxpayers, and the wider economy.

The Board is closely monitoring developments in the financial markets. The U.S. banking system is in good capital and liquidity position, and the U.S. financial system is resilient.

Depository institutions can obtain liquidity against a wide range of collateral through the still open and available discount window. In addition, the discount window will carry the same margin as BTFP-eligible securities, further increasing the window’s borrowable value.

The Board is closely monitoring conditions across the financial system and is prepared to use all of its tools to support households and businesses and will take additional measures as appropriate.

Related Posts