Yellen, US Treasury: "Possibility of Some Bank Mergers... Concerns Over Commercial Real Estate Issues"

U.S. Treasury Secretary Janet Yellen stated on the 7th (local time) that there is still a possibility of mergers among relatively small banks amid concerns over a banking system crisis. While emphasizing that the overall banking system is sound, she expressed worries that problems could arise in the commercial real estate market going forward.

[Image source=Reuters Yonhap News]

In an interview with CNBC on the same day, Secretary Yellen said, "There are incentives to see some (bank) mergers." She added, "There is motivation among banks to merge, and it would not be surprising if mergers proceed. While I do not want to see the banking system threatened by additional mergers, considering the profit pressures some banks are facing, it is an understandable situation."

Secretary Yellen also acknowledged concerns about the commercial real estate market, which has been cited as the next potential trigger in the banking sector following the collapse of Silicon Valley Bank (SVB). She particularly pointed out the decline in office demand due to the spread of remote work, predicting that "there will be problems." However, she also stated, she believes banks are broadly preparing for future restructuring and difficulties. Additionally, emphasizing the results of stress tests conducted on large banks, she said, "these tests showed that they have sufficient capital to withstand any turmoil."

She said, "The capital and liquidity levels of the banking system are sound, and although there will be some pain related to this, my overall assessment is that banks will be able to cope with the pressure," adding, "regulators will closely examine a wide range of banks to ensure they are adequately prepared."

Along with this, Secretary Yellen commented on the current U.S. economy, saying, "We are seeing inflation coming down while the labor market remains strong," and forecasted that "it will continue to decline through next year." She noted, "Personal consumption remains consistently solid, but some slowdown is also being observed in economic sectors," identifying lowering inflation as the "top priority." She further added that she will continue to support the Federal Reserve's efforts to achieve price stability.