Yellen: "Not Considering 'Comprehensive Insurance' to Protect All Bank Deposits"

U.S. Treasury Secretary Janet Yellen stated that she is not considering "blanket insurance" that protects all bank deposits in response to financial market instability caused by the collapse of Silicon Valley Bank (SVB).

On the 22nd (local time), Secretary Yellen appeared before the Senate Appropriations Committee's financial subcommittee hearing and responded to lawmakers' questions about the government's efforts to prevent a bank run (mass withdrawal of deposits) by saying this.

Janet Yellen, U.S. Secretary of the Treasury
[Photo by Yonhap News]

She said, "We have not discussed or considered anything related to blanket insurance that protects all bank deposits," adding, "That is not what we are pursuing."

Earlier, the U.S. government decided to guarantee all uninsured deposits regardless of the $250,000 insurance limit in connection with the recently failed SVB and Signature Bank, thereby preventing the spread of the banking crisis in the U.S.

According to Bloomberg, the Treasury Department is currently considering temporarily raising the protection limit on insured deposits, which is currently $250,000, without congressional approval. While permanently changing the Federal Deposit Insurance Corporation (FDIC)'s deposit insurance limit requires congressional consent, temporarily easing the limit can be covered by the Treasury's $30 billion Exchange Stabilization Fund.

However, Secretary Yellen drew a line on applying blanket insurance, stating, "FDIC would only be allowed to protect all deposits when the banking crisis is considered a systemic crisis characterized by a chain reaction of bank runs."

She further emphasized that the executives who led the banks to failure must be held accountable for this incident.

She said, "This is an important issue of responsibility, and I am willing to participate in legislation for this," adding, "It is clear that shareholders and bondholders of failed banks are not protected by the government."