US Banks Borrowed More From Federal Reserve During May
In a sign that US banks continue to utilize the Federal Reserve’s borrowing programs, new data indicates that the amount of borrowing edged up during May.
US banks borrowed around $97.6bn during the month, up from $96bn in the previous week. Although the figure was an increase, it remains considerably lower than the peak of $164.8bn seen during March.
Program Changes
The Term Bank Financing Program (BTFP) saw a slight expansion in May, climbing to $93.6m. By contrast, the credit mobilized by the rediscount window decreased from US$4.210m to US$3.970m.
Another credit category, titled “other extensions of credit”, fell from $192.6bn to $188.1bn. This section included credit guaranteed by the Federal Deposit Insurance Corporation (FDIC), with “resources from First Republic Bank, sold to JPMorgan” also in the mix.
Summary
US banks borrowed $97.6bn from the Federal Reserve via in the month of May, which is up slightly from their April borrowing totals. Of the various programs, the Term Bank Financing Program, which offers short-term funding to smaller banks, saw a slight month-on-month increase to $93.6m. Overall, however, the scale of borrowing remains significantly smaller than the $165bn seen earlier in the year.
Additional Piece
The economic effects of the COVID-19 pandemic have been significant, particularly in terms of the business closures and unemployment levels seen across the United States.
The Federal Reserve, which serves as the US central bank, has implemented policies and programs aimed at alleviating some of the strain caused by the pandemic. Some of the Fed’s efforts have included actions designed to provide support to businesses in the form of credit and other financing options. At the same time, the bank has also implemented measures to maintain stability in financial markets and the overall economy.
One example of the programs enacted by the Fed is the Term Bank Financing Program (TBFP). This program offers short-term funding options to smaller banks, allowing them to continue providing financing to their customers during a time of considerable uncertainty and risk. The TBFP has assisted banks encountering difficulties in obtaining the funds they need to support their customers, and has buffered against the closure of banks struggling to make ends meet during this time.
Another policy focused on easing the effects of the pandemic on the US economy is the Federal Reserve’s pledge to maintain a low interest rate environment. By keeping interest rates low, the Fed aims to encourage borrowing and investment by consumers small businesses, and corporations alike.
Other efforts include a bond-buying program that is assisting in the flow of credit to municipalities, businesses, and households. The program currently has a cap of $2.3 trillion and has been instrumental in maintaining liquidity in the economic system throughout the pandemic.
Overall, the Federal Reserve has implemented a variety of measures to aid individuals and businesses affected by the pandemic and to foster economic stability. While the long-term effects of these policies are uncertain, the bank remains committed to its dual mandate of keeping inflation low and promoting full employment while navigating the challenges posed by the pandemic.
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The amount that US banks borrowed through the rediscount window and the emergency program of the Federal Reserve (Fed, the US central bank) went from US$ 96,000 million last week to around US$ 97,600 million for the period ended May 31.
The credit mobilized through the rediscount window was reduced from US$4.210 million to US$3.970 million, while the line of the Term Bank Financing Program (BTFP) expanded from US$91.900 million to US$93.600 million with respect to to the previous period. The total amount is far from the $164.8 billion peak seen in March.
The “other extensions of credit” category, whose resources are guaranteed by the Federal Deposit Insurance Corporation (FDIC), went from US$192.6 billion to US$188.1 billion. The modality also includes resources from First Republic Bank, sold to JPMorgan.
Related
Valor que bancos dos EUA tomaram de créditos emergenciais do Fed avançou na última semana
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