The Federal Reserve (Fed) announced bank support on Sunday to prevent contagion from the collapse of Silicon Valley Bank.
To support American businesses and households, the Federal Reserve Board announced Sunday that it will make additional funds available to eligible depository institutions to help ensure banks have the ability to meet the needs of all their depositors. This action will reinforce the capacity of the banking system to safeguard deposits and guarantee the continuous provision of money and credit to the economy.
The Federal Reserve is prepared to deal with any liquidity pressure that may arise.
Additional financing will be made available through the creation of a new Bank Term Financing Program (BTFP), which offers loans of up to one year in length to eligible banks, savings associations, credit unions, and other depository institutions that promise US Treasury bonds, agency debt, and mortgage-backed securities, and other assets qualified as collateral. These assets will be valued at par. The BTFP will be an additional source of liquidity against high-quality securities, eliminating the need for an institution to quickly sell those securities in times of stress.
With the approval of the Secretary of the Treasury, the Treasury Department will make available up to $25 billion from the Exchange Rate Stabilization Fund in support of the BTFP. The Federal Reserve does not anticipate that it will be necessary to draw on these backup funds.
After receiving a recommendation from the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve boards, Treasury Secretary Yellen, after consulting with the President, approved actions to allow the FDIC to complete its Silicon Valley rulings. Bank and Signature Bank in a manner that fully protects all depositors, both insured and uninsured. These actions will reduce stress on the entire financial system, support financial stability, and minimize any impact on businesses, households, taxpayers, and the broader economy.
The Board is carefully monitoring developments in the financial markets. The capital and liquidity positions of the US banking system are strong and the US financial system is resilient.
Deposit takers can obtain liquidity against a wide range of collateral through the discount window, which remains open and available. In addition, the discount window will apply the same margins used for BTFP-eligible securities, further increasing the loanable value at the window.
The Board is closely monitoring conditions across the financial system and stands ready to use its full range of tools to support households and businesses, and will take additional action as appropriate.
