In the aftermath of Silicon Valley Bank's collapse, the Federal Reserve has disclosed that 1,804 depository institutions utilized an emergency lending facility, representing about 20% of all eligible firms. This information was revealed in the central bank's semi-annual Financial Stability Report released on Friday.
The Bank Term Funding Program (BTFP), established last March, was designed to mitigate a liquidity crisis that emerged following a significant withdrawal of deposits which led to the downfall of both Silicon Valley Bank and Signature Bank.
According to the Federal Reserve, the majority of the borrowing entities were smaller institutions. "About 95% of the borrowers, which included banks, credit unions, savings associations, and branches and agencies of foreign banks, had less than $10 billion in assets," the report stated.
The BTFP operated by providing loans against collateral at full value, forgoing the usual reductions in valuation known as haircuts. These loans were also issued under favorable terms.
The Federal Reserve indicated that the emergency facility reached its highest lending point with $165 billion in loans, which could be held for up to a year. Although the BTFP stopped accepting new loan applications on March 11, one year after its inception, it remains active and is expected to be fully wound down by the following March.
