Source: Wind
Hong Kong's Wande News Agency reports that on Tuesday EST, US Treasury Secretary Yellen said that after regulators took tough action, the US banking system is stabilizing, but if the banking crisis continues to worsen, the government is prepared to provide further guarantees for depositors' deposits.
While preparing to deliver a speech to the American Bankers Association (American Bankers Association), Yellen said that regulators believe that new Federal Reserve instruments and discount-window loans are providing liquidity to the banking system and that the banking system is stabilizing. However, more steps will be taken if necessary.
“The steps we are taking are not meant to help a specific bank or category of banks,” she emphasized. Our intervention is necessary to protect the broader US banking system. If smaller institutions face a deposit rush and there is a risk of spread, it may also be necessary to take similar action.”
The above remarks were made after several banks went out of business, the most famous of which were$SVB Financial (SIVB.US)$with$Signature Bank (SBNY.US)$. Customers are concerned that liquidity problems caused by the risk of the lifetime of the assets held by these banks may cause similar banks to be unable to meet deposit requirements.
In response, the Treasury, Federal Reserve, and FDIC launched a two-pronged initiative to allow banks to meet their short-term borrowing needs. One, called the Bank Term Funding Program (Bank Term Funding Program), provides one-year loans secured by full-face security securities, and the other expands the Federal Reserve's discount window.
As investor confidence in America's small banks wanes, these plans help ensure that banks can borrow money to meet depositors' withdrawals.
Yellen said, “The situation is stabilizing. America's banking system remains sound. The Federal Reserve's loan instruments and discount-window loans are providing liquidity to the banking system as planned. Total deposit outflows from regional banks have stabilized.”
The SPDR Regional Banking ETF, an exchange-traded fund that tracks medium-sized bank stocks, rose 3.3% before the market. The fund has plummeted 31% over the past month.
Following Yellen's speech, Bank of the First Republic continued to rally ahead of the market. Earlier, it was reported that JPMorgan Chase (JPMorgan Chase) CEO Jamie Dimon (Jamie Dimon) was advising the First Republic on survival options, including potential financing or sale.
Bank stocks in the US have generally been unstable over the past few weeks. Although the industry is considered well-capitalized, the nature of capital has also come into question. Many banks hold longer-term securities such as US Treasury bonds, mortgage-backed securities, and municipal bonds. Bank of the First Republic, in particular, has a large portion of municipal bonds on its balance sheet.
As Federal Reserve interest rates and US bond yields soared over the past year, the face value of these bonds declined. In SVB's case, the bank was forced to sell large holdings at a loss to meet the needs of savers, triggering a further crisis of confidence.
Yellen expressed her commitment to ensure that small banks stay strong.
“The Treasury Department is committed to ensuring that our vibrant communities and regional banking institutions remain healthy and competitive,” she said.
Editor/Somer