There are no fees associated with the BTFP, and borrowers can apply for loans under the program until at least March 11, 2024
In the wake of the failures of Silicon Valley Bank and Signature Bank, on March 12, 2023, the Federal Reserve Board announced that it will make available additional funding to eligible depository institutions to help assure that banks have the ability to meet the needs of all their depositors. The new lending program, called the Bank Term Funding Program (BTFP), is effective March 13, 2023. The BTFP offers recourse loans with maturity dates of up to one year to borrowers including banks, savings associations, credit unions and other eligible depository institutions.
There are no fees associated with the BTFP, and borrowers can apply for loans under the program until at least March 11, 2024. Such loans are required to be collateralized with borrowers’ U.S. Treasury, agency debt and mortgage-backed securities, or other “qualifying assets,” in each case, valued at par. Valuation at par is potentially a significant benefit to borrowers, as recent sharp increases in interest rates may have depressed the market values of such assets. Pledged assets must have been owned by borrowers as of March 12, 2023. Interest rates on such loans will be the one-year overnight index swap rate plus 10 basis points and will be fixed for the duration of the advance on the day the advance is made. Borrowers may prepay the loans without penalty.
The BTFP will be backstopped by up to $25 billion from the U.S. Treasury’s Exchange Stabilization Fund.
About Duane Morris
Duane Morris’ Banking and Finance Industry Group will continue to monitor developments and issue additional Alerts as more information on the program becomes available. Our attorneys also help banks and other lenders apply for government programs, including the new BTFP. We can provide further information about the program (including how to submit a request for an advance) and address issues raised in the Bank Term Funding Program FAQs.
For More Information
If you have any questions about this Alert, please contact Jonathan M. Petrakis, Christopher M. Winter, Michael A. Witt, Leo F. Doyle, Jr., Terrance J. Evans, any of the attorneys in our Banking and Finance Industry Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.