U.S. Federal Reserve emergency lending to banks was on balance fairly stable at very high levels as the financial system continued to contend with banking sector stresses, central bank data released on Thursday showed.
As of Wednesday, banks tapped $88.2 billion from the central bank’s discount window lending facility, versus $110.2 billion on March 22.
The discount window is the central bank's main way of providing credit to deposit taking banks and usage of the facility, as well as other Fed credit facilities, has surged in the wake of several bank failures at the start of the month.
Lending via the Fed’s new Bank Term Funding Program moved up modestly to $64.4 billion on Wednesday, versus the $53.7 billion seen the week before. The Fed said “other credit” lending, which is tied to credit the Fed extended to Federal Deposit Insurance entities dealing with failed banks stood at $180.1 billion, from March 22’s $179.8 billion.
The three facilities extended a total of $332.7 billion to
eligible firms on Wednesday, versus $343.7 billion the prior
Wednesday. At the start of the month, lending via the discount
window was just under $5 billion and the BTFP had yet to launch.
Moving borrowing from the discount window to the new
BTFP facility had been expected by many analysts given the
favorable terms on the new lending tool.
In
comments on Wednesday
, Dianne Dobbeck, head of the Supervision Group at the New
York Fed, said using the BTFP "can be part of sound liquidity
risk management."
She added, "together with banks' internal liquidity and stable deposits, other external sources, and discount window lending, the BTFP provides ample liquidity for the banking system as a whole."
The latest round of Fed lending caused the overall size of the Fed’s balance sheet to fall to $8.756 trillion, from $8.784 trillion on March 22.
Fed lending has caused the central bank's balance to
grow substantially but officials have said repeatedly that this
expansion is not stimulative of the economy.
The Fed continues to press forward with allowing just
under $100 billion per month in bonds it owns to mature and not
be replaced, in an effort that complements its rate rise
campaign aimed at lowering high levels of inflation.
The Fed also said that its lending facility for foreign central banks and other official accounts slipped to $55 billion as of Wednesday, versus the prior week's $60 billion.
A source familiar with the matter said that last week's
borrowing was tied to the Swiss National Bank as part of the
emergency liquidity offered to Credit Suisse. The SNB declined
to comment when asked about the matter earlier this week.
(Reporting by Michael S. Derby
Editing by Chris Reese and Marguerita Choy)
