This week the Federal Reserve announced a new emergency lending program in response to the financial industry turmoil caused by the failure of Silicon Valley Bank and other banks. The Bank Term Funding Program provides loans to banks, credit unions and other financial institutions for up to a year on favorable terms in exchange for collateral like Treasurys and other government-backed bonds. The Fed also reported that banks, credit unions, and financial institutions have borrowed $53.7 billion from the program as of Wednesday, which is a marked increase from the $11.9 billion borrowed one week ago. Additionally, $110.2 billion was borrowed from the discount window, which is a more traditional lending facility. The discount window provides loans of up to just 90 days.
The Fed has not revealed which banks received the funding, but the emergency lending comes after a bank run prompted by the decline of available funding for startups and the selling of SVB's bond holdings at a $1.8 billion loss. The Bank Term Funding Program will allow banks to borrow against those bonds, giving them access to money should customers wish to make withdrawals. The Fed's move highlights the importance of having support systems in place for banks and financial institutions during times of crisis.