News Digest:

The US Federal Reserve has terminated the bank term funding program that began a year ago following the failure of several regional banks in the United States. The Fed announced that the funding program ceased giving loans on Monday (March 11) as additional liquidity.

The funding program was launched by the Fed last year to assuage concerns over the stability of the US banking system and support the economy that faced inflationary pressures. Now Wall Street banks are exploring new funding options given that the Fed’s emergency lending mechanism has ceased to exist, according to a news report.

Takeaway:

The Federal Reserve too faces a major challenge as it continues to reduce its balance sheet via quantitative monetary tightening since the pandemic lockdowns began in 2020. There is growing concern in the industry on whether the US financial system has the requisite tools to maintain necessary cash levels amidst the continuing rate squeeze.

End Notes

Source: https://www.bloomberg.com/news/articles/2024-03-11/end-of-fed-tool-that-buoyed-us-banks-puts-reserves-in-spotlight