The Federal Reserve announces that the Bank Term Funding Program will end as scheduled

The Federal Reserve announced that the BTFP will come to a close. A reminder of what the BTFP was, and why it was initiated.

• As described in our podcast in [July], the BTFP was used. Some indications of levels.
• Would describe the part of the release that describes the changes in the rates, but in a just-the-facts way.
• The decision to close the facility might be motivated by the fact that unusual and exigent circumstances no longer obtain that would merit re-authorization.
• The sector appears healthier than during the brief period of turmoil last year, and financial markets and the economy are in good shape.
• Presumably, the Fed judged that the facility was no longer needed, and that banks had adequate sources of funding.
• And, the BTFP could be part of the Fed’s toolkit going forward for emergencies. Compare how some of the facilities from 2008 got rolled out in in 2020
• Cite to various regulators statements that banks should have collateral pledged and test their readiness.

In this episode

• James Bergin, Partner, Arnold & Porter
• Warren Hrung, SVP, Head of Banking and Financial Services Research, American Bankers Association