Yellen expressed ‘full confidence in bank regulators’ in SVB

The Biden administration on Friday reacted to the biggest failure of a US lender in more than a decade, giving assurances that the US financial system will come to terms with the fallout from the collapse of Silicon Valley Bank and that regulators are keeping a close eye on developments.

Treasury Secretary Janet Yellen said she has “full confidence in bank regulators to take appropriate actions in response,” adding that regulators “have effective tools” to address the situation.

Yellen called a meeting on Friday with leaders from the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency to discuss developments around the SVB, the Treasury said in an emailed statement.

White House officials also weighed in, saying the US banking system has benefited from reforms implemented after the 2008-09 financial crisis.

“Our banking system is fundamentally different” compared to 2008, Cecilia Rouse, chairman of the Council of Economic Advisers, told reporters. “We know we need to build more resilience into our banking system, allowing it to withstand these types of shocks.”

The Dodd-Frank Act, passed by Congress in 2010, imposed tougher capital and liquidity requirements on banks, and subjected the largest banks to a special set of rules, including annual stress test.

Rouse would not comment on what happens to SVB deposits that exceed the federally insured limit of $250,000 and referred the question to the FDIC.

Regulators came in and seized SVB on Friday at a stunning fall for a lender that has quadrupled in size in the past five years and was worth more than $40 billion as recently as last year. That followed a tumultuous week that saw an unsuccessful attempt to raise capital and a cash exodus from tech startups that fueled the lender’s hike.

Just a few days ago, Silvergate Capital Corp. also announced. that their bank was closed.

The combination triggered a broader selloff in stocks. The Treasury statement appeared aimed at reassuring financial markets and preventing a wider investor panic.

In the US, Thursday was the worst day for the KBW Bank Index since June 2020, as its members shed more than $90 billion in value. Europe’s biggest banks lost more than $40 billion from their market capitalizations on Friday.

Agency chiefs Yellen convened on Friday are members of the Financial Stability Oversight Council, a group of regulators tasked with monitoring risks to US financial stability.

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