BAILOUT: Feds Rescue Depositors Amid SVB Bank Collapse

The Federal Reserve Board on Sunday announced that it will provide additional funding to eligible depository institutions to help them meet the needs of all their depositors, a move that will backstop depositors and protect financial institutions, including SVB Financial Group's SIVB Silicon Valley Bank.

The move is aimed at supporting American businesses and households by bolstering the capacity of the banking system to safeguard deposits and ensure the provision of money and credit to the economy.

To make this happen, the Federal Reserve will create a new Bank Term Funding Program (BTFP), which will offer loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions.

The financing will be made available through pledging U.S. Treasuries, agency debt, mortgage-backed securities, and other qualifying assets as collateral.

The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.

The Department of the Treasury will make available up to $25 billion from the Exchange Stabilization Fund as a backstop for the BTFP.

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However, the Federal Reserve does not anticipate that it will be necessary to draw on these backstop funds.

According to a press release issued by the Federal Reserve Board, conditions across the financial system are being monitored and the board is prepared to use its full range of tools to support households and businesses and will take additional steps as appropriate.

These actions are aimed at reducing stress across the financial system, supporting financial stability, and minimizing any impact on businesses, households, taxpayers, and the broader economy, the Board stated.

The Federal Reserve Board reassured that the capital and liquidity positions of the U.S. banking system are strong, and the U.S. financial system is resilient.

Depository institutions can obtain liquidity against a wide range of collateral through the discount window, which remains open and available.

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