14 Jun COTW: Ongoing Banking Stresses
- The U.S. banking sector came under significant stress earlier this year, when three large domestic banks collapsed. The trigger event was the collapse of Silicon Valley Bank on March 10. In response to stresses in the banking sector, the Federal Reserve established several programs aimed at assisting struggling banks. One of these programs was the Bank Term Funding Program (BTFP), which was created to ensure banks have the ability to meet the needs of depositors.
- BTFP usage skyrocketed in March, reaching a peak in April. Since then, BTFP usage remained elevated, albeit at relatively consistent levels. On May 3, BTFP usage started to climb again, and reached record-level use in the first week of June. This recent spike points to the possibility of banks struggling to meet the withdrawal demands of depositors.
- Another sign pointing to ongoing banking sector stresses is the inflows into U.S. Treasury money markets. Over May, U.S. Treasury money market funds saw $125 billion in inflows—the second largest monthly inflows since 2021. While inflows eased during the first week of June, this points to continued banking stresses as depositors withdraw money from banks and transfer funds into money market funds.
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