On November 27, 2023, S&P Global Market Intelligence quoted Max Bonici on new barriers U.S. banks will face in accessing liquidity. According to the article, the Federal Housing Finance Agency (FHFA) is striving to limit depository institutions from borrowing from Federal Home Loan Banks (FHLBs).
The proposed rules would diminish U.S. banks’ borrowing from the FHLBs, in part to ensure that they are not treated as a last resort. "It will force them to look at more costly, less preferential forms of liquidity," explained Bonici. According to the article, such limits on banks' FHLB borrowing abilities will push them toward more costly options.
S&P Global Market Intelligence also reports that the FHFA is hoping banks will tap into Fed facilities, such as the discount window, which are intended for financial institutions facing urgent liquidity concerns. According to Bonici, if the FHFA is successful in limiting banks’ FHLB borrowing abilities, lenders may still be hesitant to use the discount window because of its stigma, which is, “more of a psychological phenomenon.”
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