The Fed’s BTFP May Manage $2 Trillion for US Banks and US JP Morgan by CoinEdition

© Reuters. The Fed’s BTFP May Manage $2 Trillion for US Banks, US JP Morgan
  • JPMorgan commented that the BTFP Fed will reduce the liquidity crisis in the US banking system.
  • The Federal Reserve announced the introduction of the BTFP, a financing program to help US banks.
  • According to the new scheme, the Federal Reserve will administer $2 trillion to US banks.

c. B. Morgan Chase (NYSE:) & Co, the financial services company said on Wednesday that the Federal Reserve’s emergency financing program will manage nearly $2 trillion in funds in the US banking system, easing the current liquidity crisis.

Notably, on March 15, the Federal Reserve System Board of Governors announced the introduction of the Bank Term Funding Program (BTFP), citing:

The BTFP was created to support US businesses and households by providing additional funding to eligible depository institutions to help ensure that banks have the capacity to meet the needs of all depositors.

Following the Fed’s announcement, JP Morgan commented, “Utilization of the Fed’s Term Funding Program is likely to be significant.” The company added that the Federal Reserve promised to contribute the amount to ease the liquidity crisis, which is likely to be closer to $2 trillion, which is the nominal amount of bonds held by US banks.

The company’s strategists emphasized that BTFP would support the banking system by giving it adequate reserves, thus helping it reduce the scarcity of reserves. The scheme will also help reverse the tightening trend the entire industry has plunged into over the past year.

Significantly, according to the Federal Reserve program, banks, savings societies, and other eligible institutions will be granted loans of up to one year in duration as “an additional source of liquidity in exchange for high-quality securities, eliminating the need for the institution to quickly sell securities in times of distress.”

Interestingly, JPMorgan strategists write that a significant part of the $3 trillion in reserves in the US banking system will be controlled by the largest banks. In addition, strategists emphasized that the liquidity crisis was the result of the Fed’s quantitative tightening as well as the rate hike.

Fed’s BTFP Could Manage $2 Trillion for US Banks, States JP Morgan first appeared in Coin Edition.

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