Rescues Of Depositors Needed If Smaller Lenders Suffer Bank Runs

Published: 2023-03-27
Views: 253
Author: Jummie
Published in: Business

The US government might come to the rescue of uninsured bank depositors if smaller lenders suffer bank runs like the one that collapsed Silicon Valley Bank.

In a remark by the US Treasury Secretary Janet Yellen, argues that the government’s “decisive and forceful actions” have successfully calmed the banking crisis and boosted confidence in the system.

According to CNN, Yellen said a new lending facility launched by the Federal Reserve along with its existing discount window “working as intended to provide liquidity to the banking system.”

Fearing a series of bank runs, the Federal Deposit Insurance Corporation stepped in to protect all depositors — even those above the $250,000 insurance limit — after Silicon Valley Bank and Signature Bank failed.

Yellen added that the US actions “reduced the risk of further bank failures” that would have drained the FDIC’s insurance fund.

She emphasized that while large banks play a central role in the US economy, so do small and mid-sized banks, noting they provide credit and financial support to families and small businesses and often have specialized knowledge of their communities.

Regional bank stocks have been volatile ever since the bank failures, with some lenders such as First Republic experiencing dramatic declines.