WASHINGTON: The US banking system “remains sound” despite market anxiety over the collapse of Silicon Valley Bank (SVB) and Signature Bank, Treasury Secretary Janet Yellen will tell members of Congress on Thursday, according to prepared remarks.
The consecutive bank failures are the sector’s biggest casualties since the 2008 financial crisis, prompting US authorities to quickly step in to protect depositors.
Amid contagion fears, the US Federal Reserve also announced it would make extra funding available to banks to help them meet the needs of depositors, which would include withdrawals.
Yellen, in remarks released ahead of her Senate Finance Committee appearance on Thursday, describes the government’s actions as “decisive and forceful,” while demonstrating authorities’ commitment to ensuring that deposits remain safe.
“I can reassure the members of the Committee that our banking system remains sound, and that Americans can feel confident that their deposits will be there when they need them,” she said ahead of the hearing, which will cover President Joe Biden’s latest budget proposals.
SVB – the country’s 16th biggest bank by assets and a key lender to startups across the United States since the 1980s – collapsed after a sudden run on deposits, prompting regulators to seize control on Friday.
On Sunday, the Treasury, Fed, and Federal Deposit Insurance Corporation set out plans to ensure SVB’s customers would be able to access their deposits, while the Fed introduced a new lending tool for banks in an effort to prevent a repeat of SVB’s quick demise.
While Biden sought to reassure Americans over the country’s financial system at the start of this week, there had been immediate signs of pressure at other US lenders.
In Europe, major lender Credit Suisse flashed warning signs on Wednesday, causing markets to nose-dive before the Swiss National Bank stepped in to reassure investors and offer liquidity.