The Bank Term Funding Program (BTFP), an emergency lending program initiated by the American central bank, has experienced its highest level of distressed asset redemptions since its establishment three months ago. Launched in response to the United States banking crisis and the collapse of Silicon Valley Bank, among others, the BTFP aims to provide support to banks and other depository firms.
Data from the Federal Reserve Bank of St. Louis reveals that the BTFP has reached a record high of $103.08 billion in loans for the week ending June 28. This milestone indicates that the Federal Reserve is still intervening to bail out banks, despite its efforts to assure investors that the banking crisis is under control.
American banks challenges
Market analyst Joe Consorti has commented on these latest figures, suggesting that the “Fed’s shadow liquidity is propping up risk-taking behavior across markets.” He believes that this may incentivize investors to take greater risks, which is evident in the rising stock markets, such as the S&P 500. Consorti goes on to speculate that the Federal Reserve may need to create a new facility to purchase distressed commercial real estate loans and potentially commercial mortgage-backed securities.
Meanwhile, American banking regulators have been urging lenders to collaborate with credit-worthy borrowers who are facing financial stress, particularly in the commercial real estate sector, which continues to experience pressure.
Interestingly, the peak of the BTFP coincides with the Federal Reserve’s announcement of its banking stress test results, which revealed that the top 23 lenders in the country had passed. While American banks are facing challenges, they are not alone in their troubles. According to a Bloomberg report, Germany’s Bundesbank may require a bailout due to losses on bonds acquired through the European Central Bank’s asset-purchase programs.
