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  • Writer's pictureStephen H Akin

Banks Borrow More

The Bank Term Funding Program continues increase.


photo of atm  data from Akin Investment
Akin Investment

The Bank Term Funding program that was created in March 2023 shows that banks are continuing to borrow from the FRB as their liquidity needs increase.


Total outstanding loans in the Federal Reserve’s bank bailout program jumped by over $5 billion in November.





There has been an increase in banks tapping into the Bank Term Funding program during the first week of the month with financial institutions borrowing $3.87 billion from the Bank Term Funding Program. There was another surge in borrowing between Nov. 15 and Nov. 22, according to Fed data.



As of Nov. 22, there was $114.1 billion in outstanding loans in the BTFP bank bailout program.


For a better perspective here is a longer term chart:


As you can see from the chart, borrowing had leveled off in August before the sudden spike in November. Keep in mind that banks were still tapping into the bailout even as the total balance in the program plateaued. Some banks were paying off loans as others borrowed.


The fact that banks are still accessing the bailout program, and suddenly at a faster rate, would seem to indicate that the banking sector remains shaky.


After the collapse of Silicon Valley Bank and Signature Bank, the Fed created the BTFP, allowing banks to easily access capital “to help assure banks have the ability to meet the needs of all their depositors.”


The BTFP offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging US Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. Banks can borrow against their assets “at par” (face value).


According to a Federal Reserve statement, “the BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.”


For a complete overview of the Bank Term Lending Program download the pdf below:

BTFP
.pdf
Download PDF • 93KB
 



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