2023 Bank Term Funding Program Tutorial: A Step-by-Step Guide for CFOs and Bank Owners
Learn how to access additional funding for your depository institution through the Federal Reserve's Bank Term Funding Program, with this comprehensive tutorial and boilerplate loan request template.
Good Afternoon & Evening, I am blessed to have you read this,
Hello, to the handful of regional bank CFOs and bank owners who are reading this.
The full Federal Reserve documents can be found here todays newsletter is about https://www.federalreserve.gov/monetarypolicy/bank-term-funding-program.htm
I will help you explore a step by step high-level tutorial of how to use the new program.
A High-Level of the Bank Term Funding Program
The Federal Reserve established the Bank Term Funding Program to provide additional funding to eligible depository institutions, such as banks, credit unions, and savings associations, so that they can meet the needs of their depositors.
The Program offers loans of up to one year, and eligible collateral includes U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities.
The Program differs from primary credit lending in several ways, including collateral eligibility, collateral valuation, margin, term, and rate.
The Program became operational on March 12, 2023, and advances can be requested until at least March 11, 2024. Any U.S. federally insured depository institution or U.S. branch or agency of a foreign bank eligible for primary credit under the Federal Reserve discount window is eligible to borrow under the Program.
Eligible borrowers must submit a request using a standard template email to their lending Reserve Bank, and eligible collateral must have been owned by the borrower as of March 12, 2023.
Bank Term Funding Program Tutorial
Determine eligibility: Check if your bank is eligible for the program as a U.S. federally insured depository institution or U.S. branch or agency of a foreign bank that is eligible for primary credit under the Federal Reserve discount window.
Check collateral eligibility: Confirm that the collateral you plan to pledge is eligible for purchase by the Federal Reserve in open market operations, such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities.
Prepare required documentation: Gather any Operating Circular No 10 documentation that a Federal Reserve Bank requires immediately upon request.
Submit request: Use the standard template email to submit your request to your lending Reserve Bank.
Provide collateral: Pledge eligible collateral owned by your bank as of March 12, 2023.
Receive loan: If approved, your bank will receive loans of up to one year in length at a rate of the one-year overnight index swap rate plus 10 basis points.
Repay loan: Repay the loan within one year.
Keep track of deadlines: Be aware that advances can be requested under the program until at least March 11, 2024.
Operating Circular No 10 Documentation
Operating Circular No. 10 (OC-10) is a set of guidelines issued by the Federal Reserve Banks that outlines the requirements for financial institutions to participate in certain Federal Reserve programs. Here's a step-by-step guide to help you gather the necessary documentation for OC-10:
Contact your Federal Reserve Bank: Start by contacting your local Federal Reserve Bank to request a copy of the latest version of Operating Circular No. 10. The Bank will provide you with a detailed list of the documentation you need to provide to participate in the program.
Gather legal documents: You'll need to provide documentation that verifies your institution's legal status and authority to enter into financial transactions. This might include articles of incorporation, bylaws, and other relevant legal documents.
Provide financial statements: You'll need to provide recent financial statements that demonstrate your institution's financial stability and ability to repay the loan. This might include balance sheets, income statements, and cash flow statements.
Demonstrate collateral eligibility: You'll need to demonstrate that the collateral you're pledging as security for the loan is eligible for purchase by the Federal Reserve Banks in open market operations. This might include U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities.
Provide a loan request letter: You'll need to provide a formal loan request letter that outlines the details of the loan you're requesting, including the loan amount, term, and interest rate.
Obtain necessary approvals: Depending on the size of your institution and the amount of the loan you're requesting, you may need to obtain approval from your board of directors or other internal committees.
Submit documentation to the Federal Reserve Bank: Once you've gathered all the necessary documentation, you'll need to submit it to the Federal Reserve Bank along with your loan request letter. The Bank will review your documentation and notify you of any additional information or documentation needed to complete the process.
Loan Request Letter Boilerplate Template
Dear Sir/Madam,
I am writing to request a loan through the Bank Term Funding Program offered by the Federal Reserve. As an eligible borrower, I am submitting this request for a loan to support my business's financial needs.
Loan Details: Loan Amount: [insert amount] Loan Term: [insert term] Interest Rate: [insert rate]
Collateral Details: I am providing collateral in accordance with the Bank Term Funding Program guidelines. The collateral I am offering for this loan includes [list of eligible collateral].
Operating Circular No 10 Documentation: I have attached all necessary documentation for Operating Circular No 10, as required by the Federal Reserve Bank. Please let me know if there is any additional information needed to complete the application process.
Thank you for your time and consideration. I look forward to hearing back from you soon.
Sincerely,
[Your Name]
Good Luck & Good Job to All of You
Although things may seem tough right now, remember that better days are ahead. It's important to stay optimistic and keep pushing forward, even if there are challenges along the way. Keep in mind that every obstacle you overcome brings you closer to a brighter future.
You’re Friend,
Cody Krecicki
A.I. Financial Research Writer