Bank Term Funding Program to Sunset; Discount Window Remains Important for Liquidity Management

On January 24, the Federal Reserve Board announced the Bank Term Funding Program (BTFP) will cease making new loans after March 11, 2024, as indicated in the original BTFP term sheet. As noted on the frequently asked questions related to the BTFP, the program recognizes that the par value of the collateral pledged to the Program by the borrower will be reduced by payments of principal. To ensure the par value of the pledged collateral at least equals the outstanding balance of the borrower’s Program advances, the lending Reserve Bank will request additional collateral to offset the principal payments or ask the borrower to reduce the outstanding advances balance to match the par value of the current collateral. Program borrowers that expect reductions in the par value of their pledged collateral may wish to pledge sufficient Program-eligible collateral in advance of such reductions.

Along with the Discount Window, the Bank Term Funding Program remains an important part of the Federal Reserve’s response to the banking stress that emerged in March 2023. The federal financial institution regulatory agencies issued updated guidance on liquidity risk and contingency planning in July 2023. The updated guidance encourages all banks to continue reviewing their contingency funding plans to ensure they are prepared for a wide range of possible stress scenarios. Banks should also review the operational steps required to access funding from the Discount Window, BTFP and the Federal Home Loan Bank System.

If you have questions about the BTFP or on any of the Federal Reserve’s lending programs, please contact the Federal Reserve Bank of Richmond’s Credit Risk Management office at 1-800-526-2036 or the "Contact Us" option below.