US not considering ‘general insurance’ for bank deposits, says Yellen

WASHINGTON, March 22 (Reuters) – US Treasury Secretary Janet Yellen told lawmakers on Wednesday that the Federal Deposit Insurance Corporation (FDIC) is not considering offering “general insurance” for bank deposits following the collapse of two prominent US banks this month.

Some banking groups have urged Congress to temporarily guarantee all U.S. bank deposits, a move they say will prevent a deeper crisis following the failure of Silicon Valley Bank and Signature Bank.

Speaking to a U.S. Senate subcommittee, Yellen said she believed it was “worth it” to look at changes to FDIC deposit insurance, but that raising it above the current $250,000 limit was not considered. to take.

When a bank failure “is considered a systemic risk, which I consider the risk of a contagious bank run, (we) will likely invoke (a) systemic risk exception, which allows the FDIC to protect all deposits,” Yellen said. , adding the systemic risk department will be determined on a case-by-case basis.

Yellen said the government was not considering “anything to do with general insurance or guarantees of deposits”.

Shares in the beleaguered First Republic Bank (FRC.N), which has lost much of its value since the U.S. banking crisis began on March 8, fell 15.5% to close at $13.33 on Wednesday after Yellen’s comments

Yellen told the Senate Appropriations Subcommittee on Financial Services and General Government that banks across the country were concerned about contagion from the bank failures and that President Joe Biden’s administration was focused on stabilizing the banking system.

She said the collapse of Silicon Valley Bank brought an “overwhelmingly fast” bank run.

“As far as I know, we’ve never seen deposits flee as quickly as we did with Silicon Valley Bank,” Yellen said.

Any losses to the FDIC’s Deposit Insurance Fund from the bank collapses will be recovered through a special assessment against the banks, the FDIC said. Yellen said it was “not self-evident” that banks would pass those costs on to banking customers.

Yellen also said the Treasury Department was reinstating the ability of the Financial Stability Oversight Council (FSOC) to designate non-bank financial institutions as systemically important, subjecting them to stricter regulation.

This reflects concerns that financial risk may migrate to less regulated hedge funds and so-called “shadow banking” institutions.

Edited by Chizu Nomiyama and David Gregorio

Our Standards: The Thomson Reuters Principles of Trust.


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