Yellen says US banks are ‘stabilizing,’ after tumultuous March
Treasury Secretary Janet Yellen said the situation around US banks was “stabilizing,” though regulators stood ready to repeat the extraordinary actions taken in March to contain depositor runs.
PremiumTreasury Secretary Janet Yellen said the situation around US banks was “stabilizing," though regulators stood ready to repeat the extraordinary actions taken in March to contain depositor runs.
“My read is the outflows from smaller and medium-sized banks are diminishing and matters are stabilizing, but it’s a situation we’re watching very closely," Yellen told reporters in New Haven, Connecticut, Monday.
She was speaking days after a Federal Reserve report showed that deposits at small banks increased in the latest weekly data. The KBW Bank Index of stocks also rose last week after three weeks of declines.
Through “forceful actions" and assurances, US officials have shown “that we stand prepared to take similar actions again if banks experience contagious runs," Yellen said — referring to the rescues of uninsured depositors at Silicon Valley Bank and Signature Bank last month.
The Federal Reserve also last month created an emergency lending facility to provide liquidity to banks facing outflows. That was designed to strengthen the Fed’s function “as a lender of last resort," said Yellen, a former Fed chair.
FSOC Defense
“We’re not willing to allow contagious runs to develop," she said.
Meantime, Yellen pushed back against criticism that the Financial Stability Oversight Council, the body she chairs that’s charged with identifying systemic financial threats, failed to identify ahead of time the forces that came close to sparking a much wider run on bank deposits.
Some Republicans on Capitol Hill have said FSOC missed the threat posed by rapidly rising interest rates because it was too focused on climate-related risks to financial stability.
“We’ve focused on a range of issues, including financial risks, and have not put all of our focus on climate risks," she said. “Interest-rate risk was identified in our annual report."
The recent turmoil, she said, was limited to “a couple of banks" with unusually high exposure to runs because of a dependence on uninsured depositors.
“I don’t think there’s a fundamental problem with the banking system," she said. “We need to decide what regulatory and supervisory changes need to be put in place that maybe this episode has highlighted. But we don’t have a weak banking system."
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This story has been published from a wire agency feed without modifications to the text.
