Reply To: Traders Market Weekly: The Fed, BoE and SNB and a Leaky Dyke…


Federal Reserve announces emergency lending facility – deposits “guaranteed”

Federal Reserve and Treasury:

taking decisive actions to protect the US economy by strengthening public confidence in our banking system
boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank
no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer
we are also announcing a similar systemic risk exception for Signature Bank, NewYork, which was closed today by its state chartering authority
all depositors of this institution will be made whole
Signature shareholders and certain unsecured debt holders will not be protected
Signature senior management has been removed
The Federal Reserve board on Sunday announced it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors
Banking system remains resilient and on a solid foundation
Any Signature Bank losses to the deposit insurance fund to support uninsured depositors will be recovered by a special assessment on banks
Fed will make available additional funding to eligible depository institutions to help assure banks can meet depositors’ needs
To provide liquidity to US Depository institutions, each federal reserve bank would make advances to eligible borrowers, taking as collateral certain types of securities
Treasury department, using the exchange stabilization fund, would provide $25 billion as credit protection to the Federal Reserve banks in connection with bank term funding program
Today’s actions demonstrate US commitment to take ‘necessary steps’ to ensure that depositors’ savings remain safe
Eligible collateral includes any collateral eligible for purchase by the Federal Reserve banks in open market operations
Rate for term advances will be the one-year overnight index swap rate plus 10 basis points; the rate will be fixed for the term of the advance on the day the advance is made
Collateral valuation will be par value; margin will be 100% of par value
Advances can be requested under the program until at least March 11, 2024
Advances made under the program are made with recourse beyond the pledged collateral to the eligible borrower