Federal Reserve Establishes $25 Billion Funding Program to Avoid Banking Liquidity Issues
The Federal Reserve Board has announced the establishment of a $25 billion Bank Term Funding Program (BTFP) aimed at providing liquidity backstops to banks and other eligible depository firms to avoid further banking liquidity issues.
This move comes as several U.S. banks have collapsed recently, raising concerns among depositors about the safety of their deposits.
Loan availability for eligible firms
The BTFP offers loans of up to one year to eligible firms such as banks, savings associations, credit unions, and other eligible depository institutions.
To qualify for the loan, eligible firms must pledge U.S. Treasuries, agency debt and mortgage-backed securities, or other qualifying assets as collateral, which will be valued at par. The Fed believes that the BTFP will serve as an additional source of liquidity against high-quality securities, eliminating the need for institutions to sell securities in times of stress.
Panic in the crypto space
The BTFP’s announcement comes in the wake of Silicon Valley Bank’s significant sale of assets and stocks, which led to a run on the bank by depositors. This panic spread to the crypto space, as stablecoin issuer Circle disclosed it had $3.3 billion in SVB, causing further panic and resulting in its stablecoin USD Coin losing its peg to the U.S. dollar.
FDIC action to make SVB depositors whole
The announcement of the BTFP coincides with the Federal Deposit Insurance Corporation’s (FDIC) approval of actions for making Silicon Valley Bank depositors whole and the closure of New York-based Signature Bank, citing systemic risk.
These actions will go a long way in rebuilding trust in the banking industry, especially among depositors who may have lost confidence due to recent banking failures.
READ MORE: Robert Kiyosaki Warns Another Bank Is Set to Crash
Importance of the funding program
The BTFP is an important move by the Federal Reserve Board to provide liquidity support to eligible banks and other depository firms. It will help ensure that the customers’ needs during times of turmoil are met.
With the BTFP, eligible banks will have access to a reliable source of funding in times of stress, reducing the risk of bank runs and other liquidity crises.
Final thoughts
In summary, the Federal Reserve Board’s announcement of the Bank Term Funding Program (BTFP) will go a long way in preventing further banking liquidity issues.
Eligible firms will now have access to a reliable funding source in times of stress, reducing the risk of bank runs and other liquidity crises. With the FDIC’s approval of actions to make Silicon Valley Bank depositors whole, this move will help rebuild trust in the banking industry, especially among depositors who may have lost confidence.
Andrey Kunev
Reporter at CoinsPress
Andrey Kunev is a knowledgeable cryptocurrency content creator passionate about the crypto market. With extensive experience in market analysis and investment reporting, Andrey is a valuable asset to the CoinsPress team. As a frequent contributor, he offers insightful and comprehensive coverage of market trends, price fluctuations, and new advancements in cryptocurrency. Whether you're a seasoned investor or just getting started, Andrey's clear and concise writing offers a comprehensive look at the current state of the crypto market and its prospects. Stay up-to-date with CoinsPress's expert analysis and commentary on all things cryptocurrency.
