Treasury Secretary Janet L. Yellen said on Tuesday that the US government could repeat the drastic measures it recently took to protect bank depositors if smaller lenders are threatened.

Our intervention was necessary to protect the wider US banking system, and similar actions could be warranted if smaller institutions face deposit runs that pose the risk of contagion, Yellen said in remarks to an American Bankers Ass

location

n. conference in Washington.

The federal government is firmly committed to mitigating risks to financial stability where necessary, Yellen said in a question-and-answer session. The public must have confidence in our banking system.

US authorities took extraordinary steps earlier this month to bolster that confidence following the collapse of Silicon Valley Bank and Signature Bank. Regulators guaranteed insured and uninsured deposits at the two institutions. The Federal Reserve also launched a new backstop for lenders and changed the rules at its emergency lending facility, called the rebate window, to help them take deposits.

Yellen said the current problems are significantly different from the global financial crisis more than a decade ago, which was a solvency problem. Today’s challenge is contagious bank runs, and it is vital that lenders have access to adequate liquidity, she said.

7 key questions about the collapse of Silicon Valley Bank answered

The Fed, of which Yellen previously chaired, is the most important institution, she said. The central banks’ discount window and the new Bank Term Funding Program are working as intended, she said.

According to Yellen, the situation has improved and overall deposit outflows have stabilized. Officials will continue to monitor the situation, she also said.

A coalition of medium-sized banks has pushed for an expansion of federal deposit insurance to cover all deposits, but Yellen declined to comment on Tuesday’s issue. U.S. officials have begun exploring whether to temporarily expand that coverage, Bloomberg reported.

Yellen also wouldn’t speculate on what regulatory changes might be needed in the wake of this month’s bank collapse.

We are currently focused on the current situation, she said in her prepared remarks. But we will need to review our current regulatory and supervisory regimes and consider whether they are appropriate for the risks banks face today.

Banks in crisis: what you need to know

Yellen’s comments come after two weeks of turmoil in global markets and heightened concerns about financial stability following the rapid collapse of US banks and a historic deal over the weekend that saw UBS Group AG agree to buy its troubled Swiss rival Credit. . Suisse Group Ltd.

First Republic

In the US, First Republic Bank continues its fight to restore confidence after a nosedive. in its share price. JPMorgan Chase

& Co.

Director

officers

Jamie Dimon has led plans for a group of major banks to turn some or all of the $30 billion they deposited into First Republic last week into a capital infusion, according to people familiar with the matter.

On Tuesday, Yellen defended the recent government action as a swift and necessary response.

The federal government has delivered just that: decisive and strong actions to bolster public confidence in the U.S. banking system and protect the U.S. economy, she said.

The steps, she said, reduced the risk of further bank failures that would have imposed losses on the deposit insurance fund.

She added that the US financial system was much stronger than in 2008, in part due to post-crisis reforms that imposed higher capital requirements on US lenders.

Yellen also said the government hoped to preserve the role of small and medium-sized lenders within the larger financial system.

Big banks play an important role in our economy, but so do small and medium-sized banks, she said. Treasury is committed to ensuring the continued health and competitiveness of our vibrant community and regional banking institutions.

Separately, Yellen reiterated her call for Congress to raise or suspend the federal debt limit, calling it extremely vital. While chairman

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Biden is ready to engage with lawmakers about addressing fiscal sustainability, which should happen through the regular credit process, not under the threat of a catastrophic default, she said.