Emergency loans to financial institutions from the Federal Reserve fell sharply last week, in part due to the takeover of First Republic Bank, which accounts for a large portion of outstanding loans. The Fed’s outstanding loans to financial institutions through its two backup lending facilities were $81.1 billion in the week ended May 3, compared with $155.2 billion the previous week, according to data released on Thursday. The latest figures were the lowest since March when the banking turmoil began.
Shares of several regional banks tumbled this week on reports that they may be exploring sale options. Investor fears of the banking crisis spreading to mid-sized banks increased after First Republic Bank was taken over and sold on Monday.
Borrowing outstanding from the Fed's traditional backstop lending program, known as the discount window, was $5.3 billion, compared with $73.9 billion the previous week and a record $152.9 billion last month, according to the Fed's weekly balance sheet data. Demand for new Bank Term Funding Programs (BTFP) also fell, falling to $75.8 billion from $81.3 billion last week.
The balance of loans to First Republic Bank through the discount window and the bank's term funding program, reclassified as "other credit," surged to $228.2 billion from $170.4 billion the previous week, the Fed said. This classification includes loans made to banks taken over by the FDIC, including Silicon Valley Bank and Signature Bank.
It is worth mentioning that when California regulators took over First Republic Bank, it said that as of April 28, the bank's outstanding borrowings from the Federal Reserve totalled $93.2 billion.
Policymakers are now concerned about the impact of the bank turmoil on lending activity and the broader economy.
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