In the wake of the failures of Silicon Valley Bank and Signature Bank, on March 12, 2023, the Federal Reserve Board announced that it will make available additional funding to eligible depository institutions to help assure that banks have the ability to meet the needs of all their depositors. The new lending program, called the Bank Term Funding Program (BTFP), is effective March 13, 2023. The BTFP offers recourse loans with maturity dates of up to one year to borrowers including banks, savings associations, credit unions and other eligible depository institutions.

There are no fees associated with the BTFP, and borrowers can apply for loans under the program until at least March 11, 2024. Such loans are required to be collateralized with borrowers’ U.S. Treasury, agency debt and mortgage-backed securities, or other “qualifying assets,” in each case, valued at par. Valuation at par is potentially a significant benefit to borrowers, as recent sharp increases in interest rates may have depressed the market values of such assets. Pledged assets must have been owned by borrowers as of March 12, 2023. Interest rates on such loans will be the one-year overnight index swap rate plus 10 basis points and will be fixed for the duration of the advance on the day the advance is made. Borrowers may prepay the loans without penalty.

The BTFP will be backstopped by up to $25 billion from the U.S. Treasury’s Exchange Stabilization Fund.

To continue reading the rest of the article, please click on the source link below:

https://www.mondaq.com/unitedstates/financial-services/1296310/federal-reserve-announces-loan-program-to-assure-banks-have-ability-to-meet-needs-of-depositors

Comments

comments