Following the failure of several U.S. banks, the U.S. Federal Reserve announced $25 billion worth of funding aimed at supporting banks and other depository companies.
The funds will ensure that eligible banks have sufficient liquidity to meet client needs during the turbulent period. In a March 12 statement, the Federal Reserve said it established a $25 billion Bank Term Financing Program (BTFP) to provide "banks, savings associations, credit unions and other eligible depository institutions" with Loans available for up to one year.
Eligible companies must pledge U.S. Treasury bonds, agency debt and mortgage-backed securities or other "qualifying assets" as collateral, which will be valued at "par value" -- the price at which the asset was issued.
The Fed added that this would be "an additional source of liquidity targeting high-quality securities, eliminating the need for institutions to quickly sell these securities in times of stress." Meanwhile, Silicon Valley Bank (SVB) announced on March 8 a massive asset and stock sale to raise more capital, spooking depositors and sparking a bank run.
Bank runs have polluted the crypto space as stablecoin issuer Circle disclosed that it owns $3.3 billion in SVB, sparking further panic and causing its stablecoin USD Coin (USDC) to lose its peg to the U.S. dollar.
The launch of the new program came on the same day the Federal Reserve announced that U.S. Treasury Secretary Janet Yellen had approved FDIC action to keep SVB depositors intact, with the regulator shutting down New York-based Signature, citing systemic risk.
