US Banking Industry Relies on Federal Reserve Amidst Funding Tension

03/17/2023 21:48 • Blockchain Buzz • 167 views

It is reported that in the recent week, the US banking industry has borrowed a total of $164.8 billion from the Federal Reserve through two credit facility instruments, highlighting the increasing tension in funding after the collapse of banks in Silicon Valley. According to data released by the Federal Reserve, the amount of funds lent by the Federal Reserve through the discount window reached a record $152.85 billion in the week ended March 15, up from $4.58 billion in the previous week. The last record high was $111 billion set during the 2008 financial crisis. The data also shows that the Bank Term Funding Program launched by the Federal Reserve on Sunday lent a total of $11.9 billion. From these figures, it can be seen that the US banking system is still fragile and has not yet fully emerged from the plight of deposit funds moving after the collapse of Silicon Valley banks and Signature Bank. The balance of other loans for the week totaled $142.8 billion, reflecting loans provided by the Federal Deposit Insurance Corporation to Silicon Valley Bank and the bridge bank of Signature Bank.

The Federal Reserve’s discount window borrowing soared, exceeding the total amount during the 2008 financial crisis

Analysis based on this information:

In the wake of the collapse of banks in Silicon Valley, the US banking industry has been facing increasing tension in funding. Data released by the Federal Reserve reveals that the industry has borrowed a total of $164.8 billion through two credit facility instruments. The amount of funds lent by the Federal Reserve through the discount window reached a record $152.85 billion in the week ended March 15, up from $4.58 billion in the previous week. The Bank Term Funding Program launched by the Federal Reserve on Sunday lent a total of $11.9 billion.

The data points to the fact that the US banking system is still fragile and has not yet fully emerged from the plight of deposit funds moving after the collapse of Silicon Valley banks and Signature Bank. The balance of other loans for the week totaled $142.8 billion, reflecting loans provided by the Federal Deposit Insurance Corporation to Silicon Valley Bank and the bridge bank of Signature Bank. The situation highlights the need for a better-funded banking system that is able to withstand shocks and crises.

The borrowing of such large amounts by the US banking industry from the Federal Reserve is a cause for concern. This is especially true given that the last record high for such borrowing was set during the 2008 financial crisis. The situation also points to the fact that the US banking system is in dire need of reform. Given that the system relies heavily on short-term wholesale funding, the collapse of banks can have far-reaching consequences.

In conclusion, the US banking industry is facing increasing tension in funding after the collapse of banks in Silicon Valley. The borrowing of large amounts by the industry from the Federal Reserve highlights the fragility of the sector. The situation highlights the need for a better-funded banking system that is able to withstand shocks and crises. The US banking system is in dire need of reform to ensure that it is better prepared to handle such situations in the future.

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