Users of the new Fed lending program remain anonymous – protection against stigma
The US Federal Reserve assures users of the loan program launched after the recent turbulence in the banking sector of confidentiality. Which institutes tapped into this should only be known a year after the end of the program, which is scheduled to run until March 2024. The Fed also announced on Monday evening (CET) that aggregated data on the use of the credit line would be published weekly.
The assured anonymity obviously serves to avoid stigmatization and to take away the banks’ reluctance to obtain the necessary funds from the central bank. After the bankruptcy of California’s Silicon Valley Bank (SVB) and New York’s Signature Bank, the Fed is trying to counteract the risk of a “bank run” with the new Bank Term Funding Program (BTFP). Such a withdrawal of bank deposits in a kind of panic reaction from customers is considered a super meltdown for the financial system.
With the newly created credit line, the central bank wants to ensure that sufficient liquidity is made available to the banks even in times of market stress. A key element of the program is that the central bank grants loans to the banks against acceptable collateral. US Treasuries and mortgage-backed securities are valued at face value: This means that the value of the securities once bought by a commercial bank will not be affected by the Fed’s series of rate hikes.