Yellen pledges to protect bank deposits, but more might be needed

The banking system of USA It is stabilizing after strong action by regulators, but further action may be necessary if smaller banks experience deposit runs that threaten further contagion, Treasury secretary is scheduled to tell bankers on Tuesday. Janet Yellen.

In excerpts from remarks prepared for a conference before the American Bankers Association, Yellen said the government’s steps in recent days to protect uninsured deposits at two failing banks and create new Federal Reserve liquidity facilities demonstrated a “resolute commitment to take the necessary measures to guarantee that the savings of depositors and the banking system continue to be safe”.

More than a week after the FDIC closed failed Silicon Valley Bank and Signature Bank, Yellen will say stocks “decisive and forceful” they were strengthening public confidence in the banking system and protecting the US economy.

“The measures we took were not focused on helping specific banks or classes of banks. Our intervention was necessary to protect the American banking system in general.”Yellen said in the statements released by the Treasury. “And similar actions could be justified if smaller institutions experience deposit withdrawals that pose contagion risk.”

He said actions by the FDIC, Fed and Treasury had reduced the risk of further bank failures that would have imposed losses on the bank-financed Deposit Insurance Fund.

Yellen’s excerpts did not provide details about what further measures might be warranted.

Some banking groups have called for temporary universal guarantees on all US bank deposits, a move that requires congressional approval through expedited procedures.

However, the conservative Republican House Freedom Caucus opposes extending deposit guarantees beyond the current limit of $250,000 per depositor set by the FDIC, posing a major hurdle to swift action. aimed at stemming a deeper crisis.

Guarantees for uninsured deposits at troubled banks would require Yellen, President Joe Biden and the “supermajoritiesThe Fed and the FDIC board will determine that the entity qualifies for a “systemic risk exception”, measures taken in the SVB and Signature cases.

The decision taken last week by the big banks to deposit $30 billion in First Republic Bank “represents a vote of confidence in our banking system”Yellen added.

He also said that it is important to maintain a “dynamic and diverse banking system” to support the American economy, with large, medium and small banks all playing a role in supporting households, small businesses and the growing competition in financial services.

Source: Reuters