Top U.S. bank JP Morgan Chase on Friday reported $49.6 billion in profits for 2023, a record for the bank, despite a sector crisis that shut down multiple smaller institutions.
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Banks are leveraging current interest rate projections to make a profit off of a program created last year designed to give access to funds for the sector amid a banking crisis, according to The Wall Street Journal.
The Federal Reserve created the bank term funding program in the midst of a banking crisis started by a bank run at Silicon Valley Bank (SVB) in March due to fears that SVB’s collapse would spread to the rest of the industry, according to the WSJ. Struggling banks can take depreciated bonds at face value and exchange those with the Fed for one-year loans in an effort to bolster liquidity, but since the loans are tied to future interest rate expectations and interest rates are increasingly expected to drop in the near future, banks can turn a profit on the difference.
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