The U.S. Treasury Secretary admits more may need to be done, if runs on other regional banks occur
U.S. Treasury Secretary Janet Yellen said that the country’s banking system is stabilising, but further steps may be needed to protect depositors if runs on other regional banks threaten contagion.
“Our intervention was necessary to protect the broader U.S. banking system, and similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”
Her comments came at an American Bankers Association conference, more than a week after the Federal Deposit Insurance Corporation, or FDIC, closed the failing Silicon Valley Bank and Signature Bank.
Yellen said she believed the actions of the FDIC, the Federal Reserve and the Treasury had reduced the risk of further bank failures that would have imposed losses on the bank-funded Deposit Insurance Fund.
“Let me be clear: the government’s recent actions have demonstrated our resolute commitment to take the necessary steps to ensure that depositors savings and the banking system remain safe.”
Yellen did not provide details on what further actions may be warranted.
She said that the current situation was “very different” from the 2008-2009 global financial crisis, when subprime mortgage assets put many banks under stress.
“We do not see that situation in the banking system today. Our financial system is also significantly stronger than it was 15 years ago.”
Yellen did, however, add that in coming weeks, regulators will examine the failures of SVB and Signature Bank, and reexamine whether current regulatory and oversight protocols are appropriate for the risks that banks face today.
