The Federal Reserve has no plans to extend an emergency loan program it launched last year to bolster the capacity of the banking system in the wake of the collapse of Silicon Valley Bank. At the moment, banks have $141.2 billion in loans outstanding from the bank program, according to the latest Fed data.
The Bank Term Funding Program (BTFP) will expire on March 11 as it reaches its original one-year time limit, Fed Vice Chair for Supervision Michael Barr said at a recent panel appearance, according to MarketWatch. Banks may refinance debt until the last day of the program in March, with a maximum repayment time of one year.
“The program worked as intended,” Barr said. “It dramatically reduced stress in the system very quickly. It was highly effective,” he said, adding “it really was established as an emergency program.”
On other regulatory topics, Barr said the extended comment period for the proposed Basel III capital requirements ends on Jan. 16, but he did not provide any details on what the final proposal will look like: “We’ve been receiving a lot of comments,” he said. “It’ll help us to get the balance right.”
Barr pushed back against charges by the banking industry that higher capital requirements will raise the price of mortgages and other loans to consumers. He said bank officials “talk all the time” about potential risks to the banking system posed by private credit and other alternative lenders and about how to regulate those risks.
Although private lenders operate outside the regulated banking system, banks still act as counterparties and provide loans to them, he said.
“There’s no easy answer” for how to regulate the entire system, Barr said. If regulations are too onerous, it’ll be like “squeezing a balloon,” and the risks may simply pop out somewhere else, he said.