Financial Services Association, Feb. 9 (Editor: Niu Zhanlin) On Thursday local time, US Treasury Secretary Yellen said that the banking industry may be under pressure due to weakening commercial real estate valuations, but she doesn't think this will pose a systemic risk to the US financial system.

Yellen attended a Senate Banking Committee hearing on the same day. She told lawmakers that the risk exposure of big banks is “quite low,” but smaller banks may be facing pressure related to high office vacancy rates, rising interest rates, and falling valuations.

She said it is clear that the banking sector will be under pressure and there will be losses related to commercial real estate. “This would be a major concern for some banks, but overall, the entire financial system is in good capital condition.” She pointed out that overall, the US financial system is healthy.

Recently, the stock price of Community Bank of New York in the US has plummeted one after another. Due to its excessive exposure to commercial real estate credit, it has experienced unavoidable losses, causing the regional banking crisis to once again become a hot topic in the financial field.

Rating agency Moody's downgraded New York Community Bank's credit rating by two levels to “junk” on Tuesday, putting another blow to the already troubled bank. According to Moody's, New York Community Bank faces “financial, risk management, and governance challenges.”

Bank investors have been in a state of anxiety since Signature Bank, Silicon Valley Bank, and First Republic Bank went bankrupt in early 2023. The stock decline exacerbated a crisis of trust, which eventually led to a fatal deposit rush in these banks, which have large uninsured deposits, concentrated customer bases, and bond portfolios with losses.

Community Bank of New York has tried to reassure investors on Wednesday that it has enough cash to maintain operations. However, by Thursday, New York Community Bank's stock price was still highly volatile. At one point, it fell more than 9% in the intraday period, indicating that the crisis was far from over.

On Tuesday, Yellen claimed that the combination of factors would put a lot of pressure on commercial property owners, and she was concerned about this.

Although Yellen stressed that she believes the problem is manageable, the banking supervisory authority and the Financial Stability Supervisory Committee she heads are working closely with financial institutions to study how to meet the needs of borrowers. However, her speech did not appease the market; on the contrary, it deepened investors' concerns.

The economic situation is very good

On Thursday, in addition to discussing banking issues, Yellen also analyzed the health of the US economy. Yellen believes that the US economy is performing better than other major global economies. She emphasized that inflation is slowing down while wages continue to grow.

She said that commodity prices are no longer rising rapidly, and wage increases exceeding inflation mean that Americans can use more money for savings in addition to daily consumption.

Yellen pointed out that recent surveys of consumer confidence showed that Americans' attitudes towards the economy and their own financial situation have been improving, particularly as inflation slows.

She said, “Sometimes, when people are asked about the financial situation and the performance of others, they seem to be negative, but their evaluations of their situation and their own behavior are more positive in terms of consumption or entrepreneurship.”