Amid the recent collapse of Silicon Valley Bank (SVB), banks have borrowed from the Federal Reserve through two aid programs for a total of $164.8 billion in the latest week. This record-breaking borrowing is a sign of rising funding tensions, as the banking system struggles to cope with the movement of deposits.
The Federal Reserve reported that the commercial banking group borrowed $152.85 billion through a discount window in the week ending March 15, which is a record high. This is an increase from the previous week’s borrowing of $4.58 billion. The discount window is a liquidity aid used by commercial banks during past periods of financial instability, such as the 2008 financial crisis, when the previous record high of $111 billion was borrowed.
In addition, the Federal Reserve also stated that banks borrowed $11.9 billion from the Bank Term Funding Program (BTFP), a new emergency aid tool that the Fed launched on Sunday, March 12.
The record-breaking borrowing highlights the fragility of the banking system and the need to support liquidity through the ongoing crisis. The recent collapses of SVB in California and Signature Bank in New York State have further underscored the importance of shoring up the financial system.