The Fed is ending the Bank Term Funding Program (BTFP) on March 11.
This was the program created after the march 2023 crisis.
They also increased the rate in it, because supposedly the program was being used only for arbitrage recently.
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.
Currently, the facility has 161B on borrowings, and the use of it exploded after December 2023, after being stable for months. Is still unclear if it’s really only for the arbitrage happening, or if there are some indeed banks struggling for liquidity, most are convinced it is only the latter.
While I think this is probably mostly true, I also saw this chart which shows that the regional bank cash reserves without the BTFP are not looking great, and maybe some problems could arise after the facility is closed.
But since the amounts used are still not that high, it could just mean more consolidation between big banks.
https://twitter.com/zerohedge/status/1748456248146599959/photo/1
Recently, I also saw the FED is planning to end the stigma of the discount window facility, to can be used without issues if troubles arise. Probably to avoid needing to create a new facility each time liquidity issues happen.
US regulators are preparing to introduce a plan to require that banks tap the [Federal Reserve’s discount window at least once a year to reduce the stigma and ensure lenders are ready for troubled times.
Fed Discount Window: Regulators Prep Plan to Push More Banks to Use Window - Bloomberg