On March 16, 2023, on Capitol Hill in Washington, DC, US Treasury Secretary Janet Yellen testifies before the Senate Treasury Committee regarding the planned 2024 budget proposal.
Imagery by Andrew Caballero-Reynolds | AFP | Getty
The government is prepared to offer additional deposit guarantees, according to Finance Minister Janet Yellen, should the financial crisis worsen.
The former chairman of the Federal Reserve stated in a speech to the American Bankers Association that the government believes it has taken sufficient steps to address the sector’s liquidity issues, but will take additional steps if necessary.
“The actions we took were not intended to assist any one bank or group of banks in particular. Our involvement was required to safeguard the larger US banking system, according to Yellen. And if smaller institutions suffer, similar actions might be necessary.
Following various bank failures, most notably Silicon Valley Bank and Signature Bank, remarks have been made. Consumers were concerned that duration risk-related liquidity issues in banks’ holdings might make it impossible for institutions with similar business models to meet deposit requirements.
Regulators responded by announcing that they would guarantee all deposits, exceeding the prior cap of $250,000 for the two banks. Yellen’s remarks demonstrate that authorities are ready to provide the same assistance to other institutions that require it.
According to a Monday Bloomberg article, authorities were looking for ways to guarantee all deposits. Offering a tiered pricing structure where depositors would pay extra to guarantee deposits beyond $250,000 was one suggestion that was put up.
Following SVB and Signature’s demise, the Treasury Department, the Federal Reserve, and the Federal Deposit Insurance.“The situation is stabilizing. And the US banking system remains healthy,” Yellen said. “The Fed facility and discount window lending are working as intended to provide liquidity to the banking system. Overall deposit outflows from regional banks have stabilized.”
An exchange-traded fund that tracks mid-cap bank stocks, the SPDR Regional Banking ETF, is up 3.3% in premarket trading. The fund is down 31% over the past month.
One of the sector’s more troubled banks, First Republic, rose 14.7% premarket following Yellen’s speech and following news that JPMorgan Chase CEO Jamie Dimon is advising First Republic on survival options, including a possible capital raise or a sale.
