By Oliver Gray
Investing.com - In a press conference held in New Haven, Connecticut on Monday, Treasury Secretary Janet Yellen stated that matters around US banks were “stabilizing." She acknowledged that outflows from smaller and medium-sized banks have been slowing down. However, she emphasized that this situation is being closely monitored by regulators.
The Federal Reserve recently reported an increase in deposits at small banks based on their latest weekly data. Additionally, after three weeks of declines, the KBW Bank Index of stocks rose last week as well.
Yellen reiterated that through “forceful actions" and assurances made by US officials to uninsured depositors at Silicon Valley Bank and Signature Bank last month, they have shown preparedness to contain contagious runs if necessary.
“We’re not willing to allow contagious runs to develop," said Yellen firmly while defending her role as chair of Financial Stability Oversight Council (FSOC), charged with identifying systemic financial threats.
Responding against criticism thrown towards FSOC regarding its failure in identifying ahead of time the forces leading up close calls sparking much wider run on bank deposits; some Republicans believe FSOC missed it due focus being too heavily placed on climate-related risks instead of rapidly rising interest rates.
“We’ve focused on a range of issues including financial risks,” said Yellen who pushed back against such criticism adding: "Interest-rate risk was identified in our annual report."
She further explained how recent turmoil had only affected "a couple of banks" with unusually high exposure due dependence upon uninsured depositors. She concluded by stating that there is no fundamental problem with the banking system, but regulatory and supervisory changes need to be put in place based on this episode's highlights.