The Fed Funds Risk-Premium After the Silicon Valley Bank Run and the Bank Term Funding Program (BTFP)
Abstract
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.
Fields of Study & Subjects
Global Financial Crisis and Policies
Banking stability
regulation
efficiency
Publication details
- Journal / source
- Public Finance and Management
- Publisher
- SAGE Publications
- Volume
- 25
- Issue
- 3-4
- Pages
- 156-166
- Publication date
- 24 May 2026
- Language
- EN