Janet Yellen, U.S. Treasury Secretary, stated on the 21st (local time) that "if necessary, the government will guarantee more deposits to prevent the spread of contagion in the banking sector."
According to the economic media CNBC, Secretary Yellen said in a speech draft released ahead of her address to the American Bankers Association that the authorities' response after the collapse of Silicon Valley Bank (SVB) was swift and appropriate. He said, "The measures we took were not focused on supporting specific banks. We intervened to protect the broader banking system," adding, "If small banks experience deposit withdrawals with contagion risks, similar (additional) measures may be taken."
Earlier, the Treasury Department took full deposit guarantee measures following the closures of SVB and Signature Bank. However, despite the $30 billion emergency capital injections by large banks and UBS's acquisition of Credit Suisse (CS), the stock price of First Republic Bank continued to plunge, leading some in the market to call for additional measures.
In this situation, Secretary Yellen directly confirmed that if the banking crisis escalates rapidly, deposits exceeding the deposit insurance limit of $250,000 per person for all banks can be protected. Bloomberg News also reported, citing sources, that the authorities are considering ways to guarantee full deposits. However, the Treasury currently does not consider such measures necessary.
On the same day, Secretary Yellen reiterated, "The situation is stabilizing," and "The U.S. banking system is sound." She added, "The Fed's lending programs are supporting liquidity in the banking system as intended," and "Deposit withdrawals at regional banks are also stabilizing."
The market showed further relief at Secretary Yellen's remarks. The New York Stock Exchange opened higher across the board as concerns about banking sector risks eased. The stock price of First Republic, which had been caught up in crisis rumors, also soared. First Republic jumped more than 36% compared to the previous session and trading was temporarily halted.
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