Despite the Name, Credit Unions Eligible for New Fed Liquidity Help

The NCUA Chairman has highlighted the Fed's Bank Term Lending Program as a potentially important source of liquidity backup for credit unions. Learn why.

David Baumann


Mar 22



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David Baumann

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David Baumann

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NCUA Chairman highlights initiative as potential source of liquidity backup for credit unions.

While the focus has been on the two banks that have failed, credit unions are also eligible to participate in the Federal Reserve’s controversial Bank Term Lending Program, which was created in recent weeks to help ensure that depository institutions are able to meet the needs of their depositors.

Despite the word “bank” in the name, the Fed explained that credit unions may still take part in the initiative.

“The BTFP offers loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging any collateral eligible for purchase by the Federal Reserve Banks in open market operations such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities,” a statement announcing the program reads.

House conservatives have said they are not so sure the program, which was established to help shore up the financial services industry following the recent collapse of Silicon Valley Bank and Signature Bank, is a good idea.

However, according to the Fed, “The BTFP will be an additional source of liquidity against high-quality securities, eliminating an institution’s need to quickly sell those securities in times of stress.”

NCUA Chairman Highlights Program

NCUA Chairman Todd Harper has touted the support program in statements issued by the agency.

“It’s also important to remember that credit unions have access to a wide range of liquidity sources, including important federal liquidity backstops,” he said. “The NCUA’s Central Liquidity Facility can serve as a backup source of liquidity to member credit unions. The Federal Reserve’s Discount Window and the newly created Bank Term Funding Program are also available to well-run and well-capitalized credit unions.”

Pushback From Conservative Group

The Republican House Freedom Caucus, the most conservative group in the House, on Monday said that the program should end immediately.

“The Federal Reserve must unwind its extraordinary ‘Bank Term Funding Program’ as soon as possible,” the group said. “Any universal guarantee on all bank deposits, whether implicit or explicit, enshrines a dangerous precedent that simply encourages future irresponsible behavior to be paid for by those not involved who followed the rules.”

Democratic Support

On the other hand, congressional Democrats said they want the Biden Administration to take appropriate steps to ensure the safety and soundness of the banking system.

“We appreciate the U.S. Department of the Treasury, Federal Reserve, and Federal Deposit Insurance Corporation for coming together to address the Silicon Valley Bank and Signature Bank failures and protect the financial system,” said Senate Banking Committee Chairman Sen. Sherrod Brown, D-Ohio, and Rep. Maxine Waters, D-Calif., ranking Democrat on the House Financial Services Committee, following moves by regulators and banks to shore up the system.

They added, “Today’s actions will enable workers to receive their paychecks and for small businesses to survive, while providing depository institutions with more liquidity options to weather the storm.”

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