Dr. Linus Wilson reads his latest paper about the bank runs at SVB and Signature Bank and the Federal Reserve's emergency loan program to save the banks from further uninsured deposit runs. 

28 Pages Posted:

University of Louisiana at Lafayette - College of Business Administration

Date Written: April 8, 2023

We find the emergency lending program introduced on March 12, 2023, called the Bank Term Funding Program (BTFP) coincided with a statistically significant increase in the risk-premium on Fed funds loans relative to the shortest-term T-bills. We find that the risk-premium on Fed funds loans less 28-day T-bills increased by between 39 to 56 basis points in the wake of the Silicon Valley Bank and Signature Bank runs. This led to a stealth loosening of monetary conditions without a Fed funds rate cut in part due to the incentives created by the BTFP to have banks hoard Treasuries and other eligible collateral.

Keywords: Bank Term Funding Program, BTFP, emergency lending Fed, Federal Reserve, Fed funds rate, Signature Bank, Silicon Valley Bank, T-bills, Treasuries

JEL Classification: E43, E51, E52, G21, & G28

Suggested Citation:

See all of Dr. Linus Wilson's research at www.financeprofessor.org or www.linuswilson.com

This is not investment advice.