Source: Zhitong Finance
Author: Wu Pei Sen
In the last week, Bank of America lent a total of $164.8 billion from the Federal Reserve through two credit support instruments in the discount window.
The Zhitong Finance App learned that in the last week, Bank of America lent a total of 164.8 billion US dollars from the Federal Reserve through the two credit support instruments in the discount window, highlighting that financial constraints in the banking industry are gradually increasing after the Bank of Silicon Valley went out of business. According to data released by the Federal Reserve, in the week ending March 15, the capital loaned by the Federal Reserve from the discount window (traditional liquidity support of banks) reached 152.85 billion US dollars, a record high, up from 4.58 billion US dollars the previous week. The previous record high was $111 billion reached during the 2008 financial crisis.
The data also showed that the new emergency support plan launched by the Federal Reserve on Sunday, that is, the bank's regular financing plan, lent 11.9 billion US dollars to the banking industry.
Overall, the amount of credit loans provided through the Federal Reserve's two support instruments shows that after Silicon Valley Bank and Signature Bank went out of business, the US banking system was still weak, and most of them needed to deal with deposit outflows.
Other loan balances for the week totaled $142.8 billion, reflecting loans provided by the Federal Deposit Insurance Corporation to Silicon Valley Bank and Signature Bank's transition banks.
Michael Gapen, head of US economics at Bank of America Securities in New York, said, “This is roughly in line with our expectations.” Gapen pointed out that the interest rate on loans in the discount window of the new bank term financing mechanism is higher, which may reflect a wider range of collateral banks can pledge in this window.
On Thursday afternoon, the Federal Reserve agreed on a plan to provide deposit support of about $30 billion to First Republic Bank (FRC.US), aimed at helping the bank stabilize the difficulties it is currently facing.
The US Treasury Department and the Federal Deposit Insurance Corporation stepped in and implemented regulatory measures over the weekend to protect all of Silicon Valley Bank and Signature's depositors. Normally, savers can only receive a maximum withdrawal guarantee of $250,000.
The Federal Reserve has also taken steps to meet the needs of all savers by ensuring that banks have sufficient liquidity. Its new crisis tool, BTFP, allows banks to provide collateral to the government at face value in exchange for a one-year loan. Government officials said there is enough collateral in the banking system to cover all depositors.
Analysts at J.P. Morgan Chase estimate that $2 trillion is the upper limit of how much liquidity the new support can eventually provide, although they also made a smaller calculation based on the amount of uninsured deposits of the six US banks, estimated the amount to about $460 billion, and these banks have the highest proportion of uninvested savings in total deposits.
Editor/Somer