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Treasury Secretary Yellen Announces Smaller Banks' Deposits Will Be Protected by Government

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Pavan A Follow

INDIA

Mar, 24 2023

Mar, 24 2023

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US Treasury Secretary Janet Yellen has recently announced that the federal government is willing to guarantee all deposits held by smaller banks to prevent the spread of any potential contagion. The protection of deposits held by Silicon Valley Bank and Signature Bank has already been ensured.


During a speech to the American Bankers Association, Yellen stated that appropriate measures have been taken to address liquidity issues in the banking sector. However, if necessary, the government is willing to take additional steps to protect the entire US banking system rather than specific banks or types of banks.


To extend the $250,000 deposit guarantee level for these two banks, regulators would guarantee all deposits. Temporary FDIC coverage for all deposits is reportedly being considered by the Treasury Department staff.

The US Federal Reserve and other major central banks have coordinated efforts to improve lenders' liquidity access, alleviating concerns of a financial crisis and resulting in gains in the stock markets. Despite the positive developments, investors remain cautious.


Yellen emphasized the Treasury Department's commitment to protecting community and regional banking, acknowledging the essential role that smaller banks play in fostering competition and possessing specialized knowledge of the community. She stated, "A safe and stable banking system is essential to the health of the American economy. You can rest assured that we will remain vigilant."


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Pavan A

CBW - External Analyst

INDIA

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