The Blubber

Issuing new loans as planned on March 11. The program will continue to provide loans until that date and is accessible as an extra source of liquidity for eligible institutions.

During a challenging period last spring, the Bank Term Funding Program played a crucial role in ensuring the stability of the banking system and offering support to the economy. Following March 11, banks and other depository institutions will still have convenient access to the discount window to address liquidity needs.

As the program concludes, the interest rate for new BTFP loans has been modified to ensure that the rate for new loans issued from now until the program ends will not be lower than the interest rate on reserve balances on the day the loan is issued. This adjustment is aimed at maintaining the program's support in the current interest rate environment and is effective immediately, with all other terms of the program remaining unchanged.

The BTFP was established under Section 13(3) of the Federal Reserve Act, with approval from the Treasury Secretary. It was designed to support American businesses and households by providing additional funding to eligible depository institutions to help them meet the needs of all their depositors.

The BTFP offers loans of up to one year to banks, savings associations, credit unions, and other eligible depository institutions, with any collateral eligible for purchase by the Federal Reserve Banks in open market operations accepted as security. These assets will be valued at face value, providing an additional source of liquidity against high-quality securities and reducing the need for institutions to rapidly sell these securities in times of stress.

While the termination of the BTFP is not expected to immediately impact the market, banks still have access to funding through the discount window. However, there is concern that the end of the BTFP could be the start of a series of events leading to a new crisis in the coming months.