By David Lawder
WASHINGTON, March 21 (Reuters) - The U.S. banking system
is stabilizing after strong actions from regulators, but further
steps to protect bank depositors may be warranted if smaller
institutions suffer deposit runs that threaten more contagion,
U.S. Treasury Secretary Janet Yellen plans to tell bankers on
Tuesday.
In excerpts of prepared remarks to an American Bankers
Association conference, Yellen said government steps taken in
recent days to protect uninsured deposits in two failed banks
and create new Federal Reserve liquidity facilities have shown a
"resolute commitment to take the necessary steps to ensure that
depositors’ savings and the banking system remain safe."
Yellen, speaking more than a week after the Federal Deposit
Insurance Corp (FDIC) closed the failing Silicon Valley Bank and Signature Bank , will say the "decisive and
forceful" actions were strengthening public confidence in the
U.S. banking system and protecting the American economy.
"The steps we took were not focused on aiding specific banks
or classes of banks. Our intervention was necessary to protect
the broader U.S. banking system," Yellen said in the remarks
released by the Treasury. "And similar actions could be
warranted if smaller institutions suffer deposit runs that pose
the risk of contagion."
She said she believed the actions by the FDIC, the Federal
Reserve and the Treasury had reduced the risk of further bank
failures that would have imposed losses on the bank-funded
Deposit Insurance Fund.
Yellen's excerpts did not provide details on what further
actions may be warranted.
Some banking groups have called for temporary universal
guarantees on all U.S. bank deposits, a step that requires
approval by Congress under expedited procedures. However, the
conservative Republican House Freedom Caucus opposes expanding
deposit guarantees beyond the FDIC's current $250,000 limit per
depositor, a major roadblock to swift action aimed at stemming a
deeper crisis.
Guarantees for uninsured deposits in specific troubled banks
would require Yellen, President Joe Biden and "supermajorities"
of the Fed and FDIC board to determine that the bank qualifies
for a "systemic risk exception" - actions taken in the SVB and
Signature cases.
Yellen said the Fed's new Bank Term Funding facility and
discount window lending were working as intended to provide
liquidity to the banking system and aggregate deposit outflows
from regional banks have stabilized.
A move by large banks to deposit $30 billion into troubled
First Republic Bank last week "represents a vote of
confidence in our banking system," Yellen added.
She also said it was important to maintain a "dynamic and
diverse banking system" to support the U.S. economy, with large,
mid-sized and small banks all playing a role to support
households, small businesses and increasing competition in
financial services.
(Reporting by David Lawder; Editing by Lincoln Feast.)
david.lawder.thomsonreuters.com@reuters.net))
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