As turmoil grips some of the largest banks in the United States, the Federal Reserve Board (“FRB”) has released details of its Bank Term Funding Program (“BTFP”).

As explained by the FRB’s initial release on Sunday evening, the BTFP will offer advances of up to one year to U.S. banks and other eligible institutions. Institutions will need to pledge approved collateral, such as U.S. Treasuries, agency debt, and mortgage-back securities. Critically, the FRB will value the collateral at par. This is a significant feature of the program, because the FDIC and other regulators have been monitoring the growing unrealized losses. As of the fourth quarter of 2022, banks had over $620 billion in unrealized losses in securities portfolios.

The details are being updated on the FRB’s website. The collateral that banks can pledge is identified in existing FRB regulations:

(b) . . . [D]irect obligations of, and obligations fully guaranteed as to principal and interest by, the United States are eligible for purchase by Reserve Banks. Such obligations include certificates issued by the trustees of Penn Central Transportation Co. that are fully guaranteed by the Secretary of Transportation. . . . [D]irect obligations of, and obligations fully guaranteed as to principal and interest by, any agency of the United States are also eligible for purchase by Reserve Banks. Following are the principal agency obligations eligible as collateral for advances:

(1) Federal Intermediate Credit Bank debentures;

(2) Federal Home Loan Bank notes and bonds;

(3) Federal Land Bank bonds;

(4) Bank for Cooperative debentures;

(5) Federal National Mortgage Association notes, debentures and guaranteed certificates of participation;

(6) Obligations of or fully guaranteed by the Government National Mortgage Association;

(7) Merchant Marine bonds;

(8) Export–Import Bank notes and guaranteed participation certificates;

(9) Farmers Home Administration insured notes;

(10) Notes fully guaranteed as to principal and interest by the Small Business Administration;

(11) Federal Housing Administration debentures;

(12) District of Columbia Armory Board bonds;

(13) Tennessee Valley Authority bonds and notes;

(14) Bonds and notes of local urban renewal or public housing agencies fully supported as to principal and interest by the full faith and credit of the United States pursuant to section 302 of the Housing Act of 1961 (42 U.S.C. 1421a(c), 1452(c)).

(15) Commodity Credit Corporation certificates of interest in a price-support loan pool.

(16) Federal Home Loan Mortgage Corporation notes, debentures, and guaranteed certificates of participation.

(17) U.S. Postal Service obligations.

(18) Participation certificates evidencing undivided interests in purchase contracts entered into by the General Services Administration.

(19) Obligations entered into by the Secretary of Health, Education, and Welfare under the Public Health Service Act, as amended by the Medical Facilities Construction and Modernization Amendments of 1970.

(20) Obligations guaranteed by the Overseas Private Investment Corp., pursuant to the provisions of the Foreign Assistance Act of 1961, as amended.


12 C.F.R. § 201.108(b). According to the latest release, the program is available immediately through March 11, 2024. The rate for the advances has been added to the FRB’s discount window website.

Banks should closely watch the FRB for details about the program as we proceed through these uncharted waters.

Shareholder Attorney John Lande’s practice includes advising banks on regulatory issues, including matters related to cybersecurity, criminal investigations, fraud, confidentiality, insider transactions, mobile banking, collections, and wire transfers. His focus is on helping banks implement best practices to avoid litigation and disputes in the future. Find more information on his practice here