US Banks' Emergency Borrowing Drops for Second Straight Week

Borrowing via new Bank Term Funding Program is up 22%

Federal Reserve Building in Washington DC
pabradyphoto / Getty Images

The U.S. banking system may be beginning to recover from the shock of recent bank failures, with emergency borrowing down for a second straight week.

Key Takeaways

  • Emergency borrowing by U.S. Banks fell for a second straight week as the banking system begins to stabilize.
  • Borrowing from the Fed's discount window dropped by 21%.
  • Borrowing from the Bank Term Funding Program rose by 22% last week.

Banks borrowed $322.7 billion last week from emergency lending facilities, down 3%, or $10 billion from the previous week. The biggest decrease was from the Federal Reserve's primary lending facility, the discount window, which dropped by 21% to $69.7 billion, while other credit lines, including loans by Federal Deposit Insurance Corporation (FDIC), also fell by 3%.

However, borrowing from the Bank Term Funding Program (BTFP), the special facility set up in the wake of the collapse of Silicon Valley Bank and the FDIC's takeover of Signature Bank, rose 22% to $79 billion, surpassing lending from the discount window for the first time since it was established on March 12.

Even as emergency lending declines, some industry analysts question whether more banking troubles are on the way. 

Immediately following the collapse of Silicon Valley Bank and the FDIC’s takeover of Signature Bank, financial institutions borrowed at levels not seen since the 2008 financial crisis, turning to the discount window more than at any point during that period. Even as emergency borrowing eases, banking officials and analysts are raising concerns that the fallout will continue.

“The current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come,” JP Morgan CEO Jamie Dimon wrote this week in his annual shareholder letter.

Discount Window Borrowing May Indicate Bank Weakness

The surge in emergency borrowing indicated other banks were seeing increased withdrawals from concerned depositors. Banks are reluctant to borrow from the discount window due to the impression that the institution is cash strapped and in a weak financial position.

Seeing weaknesses in the banking system, especially smaller regional banks, the Federal Reserve set up the emergency BTFP, which gave these banks some better options than the discount window. In particular, the BTFP lets banks borrow against their Treasuries at the price they paid, not their current value, the decline of which is what helped create many of the problems these banks are facing. Many banks hold Treasury securities, which have lost value as the Federal Reserve has raised interest rates.

Another key benefit of the BTFP is that it offers a year-long term, instead of the 90-day payback period of the discount window.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Federal Reserve. “Factors Affecting Reserve Balances, April 6  2023.”

  2. JP Morgan Chase & Co. “Chairman & CEO Letter to Shareholders.”

  3. Federal Reserve Bank of Richmond. “Understanding Discount Window Stigma.”

Open a New Bank Account
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.