Washington, March 21 (AFP\/APP): The US banking sector is “stabilizing” after the recent failures of Silicon Valley Bank and Signature Bank rattled the industry, Treasury Secretary Janet Yellen will tell a summit Tuesday, according to prepared remarks.<\/p>\n
The collapses caused a crisis of confidence, with many customers of similarly sized banks withdrawing their money and depositing it in larger institutions — considered too big for the government not to bail them out if they faced failure.<\/p>\n
But “aggregate deposit outflows from regional banks have stabilized” following authorities’ moves to shore up confidence and stem contagion, according to Yellen’s remarks.<\/p>\n
“Our intervention was necessary to protect the broader US banking system,” she will say in a speech to the American Bankers Association’s Washington DC summit.<\/p>\n
“And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion,” she adds in the excerpts.<\/p>\n
After SVB’s collapse, the Treasury, Federal Reserve and Federal Deposit Insurance Corporation set out plans to ensure its customers would be able to access their deposits. A similar exception was announced for Signature Bank.<\/p>\n
The Fed also introduced a new lending tool for banks in an effort to prevent a repeat of SVB’s quick demise, and has since launched a drive with other major central banks to improve banks’ access to liquidity.<\/p>\n
– Reducing risk –<\/p>\n
“I believe that our actions reduced the risk of further bank failures,” according to Yellen’s remarks.<\/p>\n
For now, she maintains that the US banking system remains sound.<\/p>\n
But there are fears over which lender could be the next domino to fall, with 11 US banks announcing last week they would deposit $30 billion into First Republic amid worries surrounding the bank.<\/p>\n
A coalition of midsized US banks has also asked federal regulators to guarantee all of their customers’ deposits for two years, a move that would help to halt an “exodus of deposits” from smaller banks, Bloomberg reported Saturday.<\/p>\n
Financial authorities have been scrambling to ease fears while worries of contagion spread to Europe, as Switzerland’s second biggest bank Credit Suisse came under pressure.<\/p>\n
Rival UBS has since agreed to take over Credit Suisse in a government-brokered deal after days of market upheaval.<\/p>\n
While US and European markets picked up on Monday, analysts say investors remain wary.<\/p>\n
But Yellen, in her speech, is set to try to reassure bankers of the Treasury Department’s commitment to safeguarding the “health and competitiveness” of the community and regional banking institutions.<\/p>\n
“You should rest assured that we will remain vigilant,” according to her speech.<\/p>\n","protected":false},"excerpt":{"rendered":"
Washington, March 21 (AFP\/APP): The US banking sector is “stabilizing” after the recent failures of Silicon Valley Bank and Signature Bank rattled the industry, Treasury Secretary Janet Yellen will tell a summit Tuesday, according to prepared remarks. The collapses caused a crisis of confidence, with […]<\/p>\n
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