U.S. banks continue to rely on the Federal Reserve’s Bank Term Fund Program (BTFP) for additional funding amid increasing depositor obligations. The latest data shows that borrowings have surpassed $100 billion, indicating that banks are still struggling to meet the withdrawal requests of their customers.
The BTFP program was launched during the banking crisis to provide liquidity to banks, allowing them to pledge their assets as collateral to access additional funding without needing to sell them during times of distress.
Read more: Uncertainty Looms over the Future of These 3 U.S. Banks
The rising number of loans issued by the Fed suggests that banks are still feeling the pressure of the Fed’s tight monetary policies, which have led to ten consecutive rate hikes over the last 14 months, driving the benchmark interest rate to 5.08 percent.
The President and CEO of Western Alliance Bancorporation conducted an analysis that revealed the company’s loans and deposits were growing at a similar rate to its competitors – First Republic, Signature Bank, and Silicon Valley Bank (SVB) – resulting in its total assets tripling over five years. However, the company’s stock price was not performing as well as its competitors. Meanwhile, First Republic, Signature Bank, and SVB have all failed due to runs on deposits during the biggest banking crisis in 15 years.
Crisis-hit banks
First Republic, Signature Bank, and SVB were all affected by the crisis, with runs on deposits leading to their downfall.Â
While the biggest banks in the U.S., like JPMorgan Chase, benefited from the banking crisis by expanding their operations and acquiring smaller banks, smaller banks continue to struggle.
Left in the lurch are roughly 4,100 other banks, including small, rural community banks that operate out of a single branch, which hold roughly two-thirds of all deposits in rural areas.Â
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