USA : Bank Term Funding Program (BTFP)

[Dona Ferentes]

Bank Term Funding Program (BTFP).

https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20230312a1.pdf

Program: To provide liquidity to U.S. depository institutions, each Federal Reserve Bank would make advances to eligible borrowers, taking as collateral certain types of securities.

Collateral Valuation: The collateral valuation will be par value. Margin will be 100% of par value.

.....
Part of the SVB package, extended to "stabilise the system" and return confidence.

Its been pointed out that unrealised losses can be "disappeared" by getting a valuation at par. This is too convenient, and merely papering over things.

 

[waterbottle]

I believe the program was only $200B in size for a potential trillion dollar problem.

The other issue is that recent Yellen testimony suggests that the FDIC insurance may not actually cover all depositors over 250k.

Liquidity crisis is here

 

[divs4ever]

did anyone ( else ) notice which types of collateral were being accepted ??

that brought a chuckle to my belly

interesting times

 

[mullokintyre]

The most recent surprise r50 bps eduction in interest rates in te USA has been quoted by various actors as being
(a) recognition that the inflationary pressure has eased significantly, and there were fears of going into a decession.
(b) A deliberate ploy by the feds to help Kamala Harris win the election.
(c) a fear that the labor market was going soft and large layoffs might be coming.
Of course there is another rationale, one which IMHO is more likely given how the fed has treated the US big banks.
With so many unrealised losses on their books, it was a part of a continuing ploy to help reduce the big commercial banks exposure in case of a requirement to liquidate.
Mick