In the week ending March 15, banks in the US borrowed about $152.85 billion from the Fed's discount lending program to manage liquidity.
Last week, the number of borrowings was only 4.58 billion USD. The previous high was $111 billion, during the 2008 financial crisis. The data also shows that banks borrowed an additional $11.9 billion from an emergency assistance program called the Grants Program.
Bank Futures Capital (BTFP) that the Fed deployed on March 12, after the collapse of Silicon Valley Bank (SVB) and Signature Bank.
With total assets of about 209 billion USD, SVB became the second largest bank in US history to fail, only after the 2008 Washington Mutual incident. Less than 18 months ago, SVB was valued at more than 44 billion USD.
Overall, the fact that banks have borrowed a total of 164.8 billion USD shows that the US banking system is still very fragile. They are facing the risk of deposit withdrawal after the closure of SVB and Signature.
In the wake of recent shocking events, the Fed's balance sheet has shrunk significantly since the US central bank began quantitative tightening last June, according to Bloomberg.
However, recent emergency loans have reversed about half of the shrinking Fed balance sheet. And the Fed's reserve balance grew by about $440 billion in a week.
The fact that banks borrow more from the Fed's traditional lending facility than BTFP suggests they can more easily mortgage assets under the traditional program.
Elsewhere, on the afternoon of March 16, 11 major banks in the US agreed to deposit 30 billion USD into First Republic to stabilize this troubled bank. This effort is coordinated by the US government.
These 11 banks are all in the list of 15 banks with the largest total assets in the US as of December 31, 2022. First Republic itself - the bank that was bailed out - has total assets of nearly $213 billion and ranks 14th, according to Fed data.
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The US Treasury Department and the Federal Deposit Insurance Corporation (FDIC) stepped in and took unusual steps over the weekend to protect all depositors at SVB and Signature. Normally, depositors are only insured up to 250,000 USD per account type.
The Fed also took a surprise move to reassure the banking industry. The US central bank ensures banks will have enough liquidity to meet all deposit needs.
The Fed's newly created BTFP program will allow banks, savings associations, credit unions and other institutions to borrow up to one-year terms, helping to ease liquidity stress.
Institutions that borrow from the Fed's program will have to have high-quality assets such as Treasuries, federally issued bonds and guaranteed securities as collateral.
Analysts at JPMorgan Chase (NYSE:JPM) estimate that the BTFP program could pump up to $2 trillion in liquidity to the banking system.
The largest US bank also gave a lower estimate of about $460 billion, based on uninsured deposits at the six banks with the highest ratio of unsecured deposits to total deposits.