U.S. Treasury Secretary, Janet Yellen, has announced that the federal government will take action to protect small lenders from deposit runs that could result in another banking crisis. Yellen made the statement during a speech at the American Bankers Association in Washington D.C., nearly two weeks after three U.S. banks – Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank – collapsed. In her speech, Yellen defended the government’s recent intervention, stating that it was necessary to protect the broader U.S. banking system and maintain the role of small and mid-size lenders in the economy, media reports said.
The U.S. regulators took swift action after the banking crisis, guaranteeing insured and uninsured deposits at both SVB and Signature, and launching a new way to help lenders cover withdrawals. However, Congress has announced a meeting scheduled for March 29 to investigate the failures of SVB and Signature Bank. The Department of Justice and the Securities and Exchange Commission have both opened inquiries into the incident, and economists have warned that over 186 banks in the U.S. are at risk of collapse.
Yellen’s statement highlights the government’s commitment to protecting the banking sector from a repeat of the 2008 financial crisis. Yellen emphasized that decisive and forceful actions were necessary to prevent contagion in the banking system. She also stated that the Treasury is committed to ensuring the ongoing health and competitiveness of the community and regional banking institutions.
The government intervention helped to maintain the important role of small and mid-size lenders in the U.S. economy, which are key drivers of growth and job creation. Yellen’s statement is expected to reassure lenders and investors in the banking sector, as they remain concerned about the long-term implications of the recent banking crisis.
The collapse of SVB, Silvergate Bank, and Signature Bank has highlighted the need for stronger regulatory oversight of the banking sector to ensure that banks are well-positioned to withstand unexpected shocks. Yellen’s speech may serve as a catalyst for policymakers to strengthen regulatory frameworks that protect the stability of the banking system.
