Banks are sitting on unrealized losses thanks to rising interest rates. That helped lead to the implosion of Silicon Valley Bank this month.
Banks are sitting on unrealized losses from bond holdings thanks to the rising interest rate environment. That issue helped lead to the
, which was forced to sell holdings at a nearly $2 billion loss earlier this month. Prices fall as rates rise, which led to the losses.March 12 to alleviate similar strains on banks and other institutions; it extends one-year loans backed by Treasurys or other secure assets, paying full price even if their market value is lower.
Another category of loans made mostly to shuttered banks to meet obligations to depositors and other expenses jumped as well. These borrowings jumped to $179.8 billion from $142.8 billion last week. Regulators seized Silicon Valley Bank and Signature Bank this month after depositors pulled their savings.
Meanwhile, banks' use of the discount window, which is the traditional way they borrow from the Fed, dropped this week. Borrowing there dropped to $110.2 billion from $152.8 billion last week. The discount window offers market value rather than par value for the securities and provides 90-day loans as compared to the one-year term under the BTFP.
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