2024-03-12 13:36:30
The Bank Term Funding Program (BTFP), an emergency lending system introduced by the US Federal Reserve a year ago to prevent the financial system from being shaken by bank failures in Silicon Valley, will become official on the 11th. It ended in Pictured is Federal Reserve Chairman Jerome Powell. Photographed on the 7th in Washington (2024 Reuters/Tom Brenner)
[11th (Reuters)]- The Bank Term Funding Program (BTFP) is an emergency lending system that the U.S. Federal Reserve (Fed) introduced a year ago with the aim of preventing financial system turmoil caused by failures of Silicon Valley banks, etc. ‘ officially ended on the 11th.
The termination of the BTFP has also raised questions regarding how the Fed will respond in the event of a similar crisis, which seems inevitable in the future.
Several experts, including Stephen Kelly, an associate professor at Yale School of Management, believe the Fed will want to avoid reviving BTFP. What is attracting attention is the over-the-counter lending system, which has been in operation for many years.
Although the BTFP appears to have been a success overall, Peter Conti-Brown, a professor at the Wharton School at the University of Pennsylvania, points out that the very existence of the BTFP was evidence that the Fed was unable to manage its counter lending system effectively. did.
Federal Reserve officials have acknowledged this to some extent and are working to improve the situation.
In testimony before the Senate on the 7th, Chairman Powell said, “We need to do more to remove the stigma (related to the over-the-counter lending system) and create a path for banks to actually use the system as needed.” We must ensure that,” he stressed.
Even though the Federal Reserve has promoted the use of the counter lending system, major financial institutions in particular continue to balk. They fear that if they use it, it will be seen as a signal that they are in trouble, and they also worry that it will bring them closer scrutiny from regulators.
For this reason, it has been a long-held desire of the Federal Reserve to resolve the issue of negative publicity associated with the use of such counter lending systems.
Some experts have suggested that concerns regarding negative publicity might be alleviated if the Fed allowed significant window borrowing even during relatively calm times. Another expert said the negative publicity would be made even more difficult if the Fed allowed this kind of liquidity to be factored into the stress-test scenarios it conducts on major banks. That’s what it means.
Bill Nelson, chief economist at the Bank Policy Institute and a former Fed official, said the Fed is determined to address the situation. He explained that the bank is trying to spread the view that the over-the-counter lending system is just “a normal part of banks’ business decisions,” and that its active use is beneficial to the financial system.
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