Last Updated on March 13, 2023 by Bitfinsider

Following several bank failures in the United States, the Federal Reserve Board has declared $25 billion in funding to support banks and other depository institutions.

The funds would make sure that eligible banks had enough liquidity to meet their clients’ needs during difficult times.

A $25 billion Bank Term Funding Program (BTFP) providing loans of up to one year to “banks, savings associations, credit unions, and other eligible depository institutions” was established, according to a statement released by the Federal Reserve Board on March 12.

Mortgage-backed securities, U.S. Treasury bonds, agency debt, and other “qualifying assets,” which will be valued “at par” — the price at which the assets were issued — must be pledged as security by qualified firms.

It would be a “additional source of liquidity against high-quality securities, removing an institution’s need to rapidly sell those securities in times of stress,” the Fed continued.

It occurs after Silicon Valley Bank (SVB) announced on March 8 that it would be selling a large amount of stock and assets to raise additional capital. This announcement caused depositors to panic and caused a run on the bank.

As stablecoin issuer Circle revealed it had $3.3 billion in SVB, further panic ensued and its stablecoin USD Coin (USDC) lost its peg to the US dollar, contaminating the crypto space as a consequence of the bank run.

The launch of the new program coincides with the Fed’s announcement that U.S. Treasury Secretary Janet Yellen had authorized steps to be taken by the Federal Deposit Insurance Corporation (FDIC) to compensate SVB depositors as well as the closure of New York-based Signature Bank due to systemic risk.