The US banking sector is “stabilising” after the collapse of Silicon Valley Bank sparked fears of a potential global financial crisis, Treasury Secretary Janet Yellen has said.
The failures of SVB and Signature Bank had profound impacts in the US, leading to other regional bank shares experiencing massive slumps.
“The situation is stabilising and the US banking system remains sound,” Ms Yellen said in remarks at an American Bankers Association summit in Washington.
Ms Yellen said she and federal regulators used emergency measures to protect depositors at those banks and stem any contagion that may have resulted from SVB and Signature's collapse.
She said similar actions could be warranted at other banks if there is a contagion risk.
“Our intervention was necessary to protect the broader US banking system,” said Ms Yellen.
“I believe that our actions reduced the risk of further bank failures.”
Ms Yellen, US President Joe Biden and other federal regulators have sought to project calm in recent weeks, reassuring Americans their deposits remain safe.
“The public should have confidence in our banking system, and it's our intention to remain vigilant in the days and weeks to come,” Ms Yellen.
Ms Yellen appeared before two Congressional hearings last week to reassure lawmakers of the US banking system, and will again make the trip to Capitol Hill this week where she will likely again be grilled on the administration's response.
Still, contagion fears remain. Most notably with First Republic, whose stock has fallen about 90 per cent since the start of the year. A coalition of 11 major banks last week deposited $30 billion into the troubled institution.
Those fears have circulated across the globe too as UBS agreed to a $3.2 billion takeover of Credit Suisse that was brokered by the Swiss national bank.
Ms Yellen and Federal Reserve Chairman Jerome Powell in a joint statement welcomed the move.
The Treasury chief said there would be time to evaluate adjustments to banking regulation, but did not provide details on what that might entail.
“What I'm focused on is stabilising our system and restoring the confidence of depositors,” she said.
Her comments come as policymakers at the Fed began their two-day Federal Open Market Committee, after which they will decide on how they will address interest rates.
The banking turmoil has upended the Fed's previous plans to return to more aggressive interest-rate raises, with some calling for a pause altogether.
But with economic data coming in stronger than expected, the Fed is expected to raise interest rates by 25 basis points as it continues its efforts to cool inflation.
