The Federal Reserve is making another $25 billion available in backstopping for financial institutions, in an effort to prevent a contagion bank run stemming from the Silicon Valley Bank (NASDAQ: SIVB) fallout.
On Sunday, the Fed pledged $25 billion from the Exchange Stabilization Fund into the newly-created Bank Term Funding Program (BTFP), which will issue one-year loans to “banks, savings associations, credit unions, and other eligible depository institutions” so they don’t have to sell-off securities during liquidity issues.
Qualifying institutions will put up “US Treasuries, agency debt and mortgage-backed securities, and other assets as collateral,” which will be valued at their issuance price. “This action will bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy,” explained the Fed in an accompanying statement.
The move follows a joint decision over the weekend from the Fed, the Treasury Department, and the Federal Deposit Insurance Corporation to take over SVB and backstop depositors’ funds, without the use of taxpayer dollars.
Information for this briefing was found via the Federal Reserve and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
