Cash-strapped banks have borrowed approx 300,000 million Dollars to the Federal Reserve last week, the central bank announced Thursday.
Almost half the money143,000 million Dollars – last week went to the holding companies of two major banks that went bankrupt, Silicon Valley Bank and Signature BankUnleash a Widespread alarm In financial markets. The central bank did not identify the banks that received the other half of the funds or say how many of them.
Holding companies for the two failed banks were created by the Federal Deposit Insurance Corporation, which took over the two banks. The money they borrowed was used Pay uninsured depositors Bonds owned by both banks have been deposited as collateral. According to the Federal Reserve, the FDIC guarantees the repayment of loans.
Statistics provide a first idea The amount of aid provided by the Federal Reserve For the financial sector after the bankruptcy of two banks last weekend.
The rest of the money was borrowed by banks for liquidity, probably, at least, to pay depositors who tried to withdraw their money. Several mega-banks, such as Bank of America, have drawn funding from smaller banks since last weekend’s bank failure.
Others 153,000 million Last week the Federal Reserve borrowed dollars through an old program called the “discount window.” Register For that project. Banks can avail loans in a discount window of up to 90 days. Typically, only 4,000 to 5,000 million dollars are lent in a week through this program.
The central bank has given another loan 11.900 million Dollars from the new credit facility it announced on Sunday. The new scheme allows banks to receive cash and pay for deposits they take.
The emergency loans issued by the Federal Reserve last week are aimed at addressing one of the main causes of the collapse of two banks: Silicon Valley and Signature held billions of dollars in Treasuries and other seemingly safe securities that paid low interest rates. .
Over the past year, yields on long-dated Treasuries and other bonds have risen as the Federal Reserve steadily raised its benchmark interest rate. AndThis reduced the value of very low-yielding Treasury bonds held by banks.
As a result, banks could not raise enough money by selling their treasury bonds to pay the many depositors who were trying to withdraw money from the banks. It’s a classic bank run.
The Federal Reserve’s lending programs, specifically the new mechanism it unveiled Sunday, allow financial institutions to borrow without selling securities as collateral.
For its new line of credit, the central bank has received 15.900 million Guaranteed dollars, more than 11,900 million lent. Banks sometimes provide guarantees to the Federal Reserve Bank before making loans. This suggests that further lending is underway.
(With information from AP)