US banks borrow $165 billion from the Fed

American banks requested loans worth US$165 billion from the US Federal Reserve this week, a request from the financial sector to deal with the “shock waves” following the bankruptcy of Silicon Valley Bank. This is a historic record for American banking, as this amount was reached in just seven days, reveals “El Economista”.

During the discount window alone (provision of short-term loans guaranteed by central banks to commercial banks, subject to the presentation of guarantees), US banks borrowed 152,850 million dollars.

The previous week, US banks had asked the Fed for US$4,580 million, an amount that falls far short of this week’s request. The last historic high had been set at 111 billion dollars during the 2008 financial crisis.

The multimillion-dollar request arrived in the same week that three American banks that financed technology companies went bankrupt: Silvergate, Signature and Silicon Valley Bank (SVB).

This value is reached one year after the Fed started the process of normalizing monetary policy, after a decade of stimuli and years of living with zero interest rates. This year, the institution’s interest rates increased by 450 basis points, to a range between 4.5% and 4.75%.

Yesterday, the US central bank revealed that it had loaned USD 12 billion to financial institutions since Sunday, March 12. This was the same day that the regulator announced that it would do whatever was necessary to cover customer deposits.

Despite these bailouts for American banks, the Treasury secretary maintained that the financial system is “solid” and that citizens can trust the safety of their deposits, even though the collapse of the SVB has weakened Americans’ sentiment towards banks.