The Strategist

US Fed will not extend BTFP loan program to support banks

01/11/2024 - 06:54

According to Michael Barr, the Fed's deputy chairman for financial supervision, the U.S. Federal Reserve does not intend to prolong the emergency lending program (Bank Term Funding Program, BTFP), which was started in 2023 to strengthen the banking sector following the failure of Silicon Valley Bank (SVB), reports MarketWatch.

Ken Lund
Ken Lund
Barr stated that the program will come to an end on March 11 when its one-year term expires.

Barr declared, "The mechanism has operated as intended. Since its launch, the financial system has experienced a rapid and significant reduction in stress. The initiative has shown to be very successful."

The Fed reports that banks are presently in possession of $141.2 billion in outstanding loans under the program.

Under the BTFP, the Fed offered loans to banks, savings associations, credit unions, and other financial institutions for a maximum of one year in exchange for a variety of securities, including US Treasuries, federal agency bonds, mortgage bonds, and others.

To assist this effort, the U.S. Treasury Department has set aside $25 billion from the stabilization fund.