New Fed facility borrowing rises for 3rd consecutive week amid liquidity crunch

Bank borrowing from the Federal Reserve's new Bank Term Funding Program increased for the third consecutive week since launching March 13, while discount window borrowing declined for the second consecutive week.

Fed data through March 29 showed Bank Term Funding Program (BTFP) borrowing grew by nearly $11 billion week over week to $64.40 billion, while discount window lending declined by more than $22 billion during that same period to $88.16 billion, maintaining the pattern from last week.

The BTFP was created in the wake of recent market turmoil following two bank failures that led to concerns about banks' liquidity. The program is intended to ease potential consumer concerns by providing additional liquidity against banks' securities so they do not have to sell those quickly in times of stress.

Regulatory officials during Capitol Hill hearings this week testified that the BTFP and the discount window are continuing to be successful in providing banks with needed liquidity.

Discount borrowing is the Fed's traditional lending backstop for eligible banks and offers a wide range of collateral. The newly formed BTFP offers loans of up to one year that allow financial institutions to use US Treasurys, agency debt, mortgage-backed securities and other assets as collateral, which will be valued at par.

Exactly which banks have borrowed from the BTFP is unclear since the list of institutions will not be released until March 2025, one year after the program ends.

However, at least one bank has disclosed its participation. PacWest Bancorp disclosed that as of March 20, it had borrowed $10.5 billion from the discount window and $2.1 billion from the BTFP.