Yellen Emphasizes Again, "US Banking System Is Sound... Deposits Are Safe"

Janet Yellen, U.S. Secretary of the Treasury, reiterated on the 16th (local time) that the U.S. financial system remains sound amid concerns over financial risks triggered by the collapse of Silicon Valley Bank (SVB).

In her opening remarks at the Senate Finance Committee hearing that day, Secretary Yellen stated, "We reaffirm that our banking system is sound," and promised, "Americans can be confident that they will be able to withdraw their deposits when needed." This marks the first time a Biden administration official has spoken to Congress following the SVB incident.

[Image source=Yonhap News]

The hearing was convened to gather opinions on the government's fiscal year 2024 budget proposal. However, due to growing concerns that the SVB incident could escalate into a crisis across the entire financial system, intense questioning on this matter was expected.

Secretary Yellen said, "The government has taken decisive and strong measures to reinforce confidence in the banking system," emphasizing, "The actions to be taken this week will confirm our firm commitment that depositors' assets are safe."

However, she added, "Shareholders and bondholders will not be protected by the government," stressing, "It is important to note that not a single penny of taxpayer money will be used for these measures."

Regarding the closure of SVB, Secretary Yellen explained, "There was a liquidity crisis in the current situation," and "We will conduct a detailed investigation into what happened at the bank and why such problems occurred. The bank was closed because it could not handle the withdrawals." The U.S. Department of Justice and the Securities and Exchange Commission (SEC) are reported to have launched preliminary investigations into SVB and Signature Bank.

Earlier, on the 12th, shortly after the incident, Secretary Yellen appeared on CBS and stated, "The U.S. banking system is safe and well-capitalized." At that time, she drew a line regarding the possibility of bailouts similar to the 2008 financial crisis, saying, "The reforms that followed mean we will never do that again."