Banks Borrow Billions to Maintain Liquidity, Fed Data Show

A sign in front of a First Republic Bank office in Oakland, Calif., on March 16, 2023. Justin Sullivan/Getty Images

Banks have borrowed a combined total of $164.9 billion from the Federal Reserve in recent weeks following the collapse of Silicon Valley Bank (SVB), data published by the central bank show.

According to Fed statistics released Thursday, banks borrowed $152.85 billion from the central bank in the week ending March 15 using the Fed’s traditional discount window—known as discount window lending—which provides loans for periods up to 90 days.

That is up from $4.58 billion the previous week.

Elsewhere, about $11.94 billion was borrowed through the newly created Bank Term Funding Program (BTFP), established to support American businesses and households by safeguarding institutions impacted by the collapse of SVB.

The BTFP, announced on Sunday, provides loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions, in return for them pledging “collateral” such as U.S. Treasuries, agency debt, mortgage-backed securities, and other qualifying assets.

Bloomberg noted that the previous all-time high borrowed from the Fed by banks was $111 billion during the 2008 financial crisis.

In keeping with tradition, the Federal Reserve did not identify the banks that took out loans in the latest statistics.

Concerns Over Broader Banking System

However, news of the latest borrowing will likely do little to ease concerns that there may be broader economic issues at play following the closure of SVB, as well as Signature Bank and Silvergate Bank.

On Thursday, Credit Suisse announced that it had taken Switzerland’s central bank up on its offer to borrow up to 50 billion Swiss Francs ($53.7 billion) as part of “decisive action to pre-emptively strengthen liquidity” after shares of the Swiss lender plunged.

Also on Thursday, First Republic Bank said it will receive $30 billion from 11 of the largest U.S. financial institutions to help it stabilize following a volatile week that saw its stocks plunge.

The banks confirmed the lifeline in a joint statement that sought to quell investor concerns.

“The actions of America’s largest banks reflect their confidence in the country’s banking system. Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most,” the banks said. ”Smaller- and medium-sized banks support their local customers and businesses, create millions of jobs and help uplift communities. America’s larger banks stand united with all banks to support our economy and all of those around us.”

President Joe Biden has also sought to ease public panic in the wake of the closures, insisting that “Americans can have confidence that the banking system is safe.”

Banking System ‘Remains Sound’

Treasury Secretary Janet Yellen also told members of Congress on Thursday that the banking system “remains sound” and that Americans “can feel confident that their deposits will be there when they need them.”

“This week’s actions demonstrate our resolute commitment to ensure that depositors’ savings remain safe,” Yellen said.

Her comments came after the federal government took extraordinary steps to ensure that depositors at SVB and Signature Bank will get their money back.

Typically, the agency covers a deposit insurance amount of $250,000 per depositor at insured financial institutions, while amounts over that threshold are considered uninsured.

However, the Federal Reserve, the Treasury Department, and the Federal Deposit Insurance Corporation (FDIC) have said that “all depositors,” meaning those who also hold accounts above that threshold, at those banks will receive their money.

The Biden administration has since promised to increase oversight and regulation of larger banks to ensure a similar situation does not occur again. Meanwhile, the Justice Department and Securities and Exchange Commission are reportedly probing the collapse of SVB.

While concerns remain regarding the wider U.S. banking system, former FDIC Chair Sheila Bair told Fox News this week that regional banks appear to be stable, although she added that further clarity and communication is needed from regulators as to why they provided systemic risk exceptions for uninsured deposits at SVB and Signature Bank.