Washington, Mar 16 (EFE).- The United States Secretary of the Treasury, Janet Yellen, assured this Thursday that the country’s banking system “is solid” and that US citizens can trust that their deposits “will be there when they need them ”.
In her appearance before legislators in the Senate, which was initially scheduled to answer questions about the new government budget project, Yellen had to refer to the Silicon Valley Bank (SVB) debacle, whose fall has unleashed an avalanche of doubts about the sector.
The Treasury portfolio holder recalled that, during this past week, the Democrat Joe Biden Administration has taken “decisive measures” to stabilize the banking system.
“First, we work together with the Federal Reserve (Fed) and the Federal Deposit Insurance Corporation (FDIC) to protect deposits,” explained Yellen, recalling that on Monday SVB clients could already access all the money in their accounts.
This was done, the official explained, without using taxpayer money, since the funds used to protect deposits come from fees paid by the banks themselves.
In addition, the Federal Reserve has launched a new fund so that banks that need to insure their customers’ deposits have money to do so.
The fall of the SVB has triggered fears of a new financial crisis, although many experts point to the exceptional situation of the firm, which specialized in serving emerging companies and the venture capital firms that finance them.
However, the panic has been spreading and has killed another bank specialized in technology – the Signature Bank, based in New York – and has forced the firm Credit Suisse to borrow about 54,000 million dollars from the Swiss central bank. after a historic fall in its shares.
Many analysts hope that the situation will force the Fed to stop raising interest rates, with which they try to curb inflation.
Another aspect that the crisis has highlighted is the role of regulators, and several lawmakers questioned Yellen about why banks’ health watchdogs failed to realize the fragile situation of the SVB. .
“I think we have to investigate what exactly happened (…) and make sure that our regulatory and supervisory system is adjusted appropriately so that banks can manage their risks and avoid problems like the ones that these two (SVB and Signature Bank) have suffered,” Yellen said.
The Fed itself announced on Monday that it will investigate its management and supervision of the Californian bank and will publish a report with its conclusions at the beginning of May.
However, and despite the doubts about the supervision of these firms, Yellen defended that no regulatory system can protect an institution from an exacerbated withdrawal of deposits promoted on social networks, as occurred in the case of the SVB.
