Banks are taking advantage of federal crisis lending programs

Signs outside a Signature Bank branch in New York, US, on Monday, March 13, 2023.

Stephanie Keith | bloomberg | Getty Images

The central bank reported Thursday that financial institutions received billions of dollars in short-term loans this week from the Federal Reserve as the industry deals with a serious crisis of confidence and liquidity.

Using the tools the Fed rolled out on Sunday, banks looking for cash infusions borrowed $11.9 billion from the bank’s term financing program. Under this facility, banks can obtain loans for one year at favorable terms against high-quality collateral.

Most banks took the more traditional route, using the Fed’s discount window under somewhat less favorable terms, while increasing borrowing by $148.2 billion for the week. The discount window provides loans up to 90 days only, while the BTFP is for one year. However, the Fed has softened the terms in the discount window to make it more attractive to borrowers who need operating cash.

There was also a significant uptick in bridge loans, which were also made over short periods, totaling $142.8 billion, which were mainly given to now-closed institutions so that they could meet their obligations to depositors and other expenses.

The data comes just days after regulators shut down Silicon Valley Bank and Signature Bank, two institutions favored by the high-tech community.

As concerns grew that customers who exceeded the $250,000 federal deposit guarantee could lose their money, regulators stepped in to support all deposits.

The programs boosted the totals on the Federal Reserve’s balance sheet, increasing the total by about $297 billion.

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