WASHINGTON—The Bank Term Funding Program (BTFP), which was created by the Fed to provide emergency lending in the wake of the crash of Silicon Valley Bank and other banks in 2023, will cease making new loans as scheduled on March 11.
The Fed also will immediately raise the interest rate on new loans from the Bank Term Funding Program (BTFP) by 50 basis points for the remainder of its life, effectively ending what many analysts had noted had become a popular and “profitable arbitrage opportunity” for U.S. lenders.
“The program will continue to make loans until that time and is available as an additional source of liquidity for eligible institutions,” the Fed stated.
“During a period of stress last spring, the Bank Term Funding Program helped assure the stability of the banking system and provide support for the economy,” the Federal Reserve said. “After March 11, banks and other depository institutions will continue to have ready access to the discount window to meet liquidity needs.
Supporting the ‘Goals’
“As the program ends, the interest rate applicable to new BTFP loans has been adjusted such that the rate on new loans extended from now through program expiration will be no lower than the interest rate on reserve balances in effect on the day the loan is made,” the Fed continued. “This rate adjustment ensures that the BTFP continues to support the goals of the program in the current interest rate environment. This change is effective immediately. All other terms of the program are unchanged,” the Fed added.
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