(Bloomberg) – Borrowing from the Federal Reserve’s backstop liquidity facilities surged last week, with outstanding loans from one of those facilities hitting a new high as financial tensions in the banking system continued.
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The Federal Reserve had a total of $96.1 billion outstanding in loans to financial institutions via two backstop lending facilities in the week ended May 17 — up from $92.4 billion in the previous week, albeit albeit still well below the peak of $164.8 billion in March, data released on Thursday.
Outstanding loans from the Fed’s discount window fell to $9 billion on Wednesday, while loans from the Bank Term Funding Program rose to $87 billion. This marked a new high for BTFP participation, which allows banks to use Treasury and agency mortgage-backed securities as collateral for loans with maturities of up to one year.
Some regional bank stocks are still under pressure, with the KBW Regional Banking Index down 26% this year, although the index recovered somewhat this week on signs of stability in deposits.
Policymakers have expressed concern about the impact of the banking turmoil on lending and the broader economy, although they have also hinted that the worst of the pain for individual institutions may be over.
“I don’t know that we’re in a crisis right now,” Atlanta Fed President Raphael Bostic said at his bank’s financial markets conference on Tuesday. “We have a small number of institutions whose risk management strategies weren’t working as well as they would like” and “therefore we didn’t experience this contagion.”
The discount window is the Fed’s oldest liquidity backstop for banks. Utilization plummeted in the first week of May following the seizure of First Republic Bank, which accounted for the majority of the facility’s outstanding loans at the time.
The BTFP, meanwhile, was launched on March 12 after the Fed declared a state of emergency following the collapse of California’s Silicon Valley Bank and New York’s Signature Bank.
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2023-05-18 23:46:23
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