The Federal Reserve Board announced on Wednesday that the Bank Term Funding Program (BTFP) will stop granting new loans as planned on March 11. Until then, the program will still provide loans and act as an additional source of liquidity for eligible institutions.
During a stressful period last year, the Bank Term Funding Program played a crucial role in ensuring the stability of the banking system and supporting the economy. After March 11, banks and other depository institutions will still have easy access to the discount window to address their liquidity needs.
As the program comes to an end, the interest rate for new BTFP loans has been adjusted. From now until the program expires, the interest rate on new loans will not be lower than the rate on reserve balances in effect on the day the loan is issued. This adjustment guarantees that the BTFP continues to serve its intended purposes given the current interest rate conditions. This change is effective immediately, while all other terms of the program remain unchanged.
The BTFP was established under Section 13(3) of the Federal Reserve Act, with the approval of the Treasury Secretary.
Read the original Federal Reserve release here.