Reassuring Americans regarding the solidity of the sector was the key word for the federation of banks as for the Biden administration, Tuesday in Washington on the occasion of the annual high mass of American banks.
The American banking sector “remains solid, resilient, well capitalized, has liquidity”, assured Rob Nichols, the head of the Association of American Banks (ABA), which represents the interests of American banks of all sizes.
Americans “can have confidence in the American banking system,” he said once more, in front of a room full of bank executives.
The failures of Silicon Valley Bank (SVB) and Signature Bank just two weeks ago have raised a wave of concern in the global banking industry. The last episode was the takeover, on Sunday, in emergency, of the Swiss bank Credit Suisse, by its compatriot UBS.
Global markets seemed reassured on Tuesday, however, with stock markets rebounding in both Europe and the United States. The various governments and monetary authorities have indeed provided strong responses to reassure on the financial solidity, and thus avoid at all costs a risk of contagion.
The American banking system is made up of large banks whose names are known internationally and which dominate Wall Street, but also of a fabric of smaller, regional or local banks.
And according to Rob Nichols, their situation is very different from that of SVB and Signature Bank: “these banks and their business model are not representative of the thousands of other banks in this country”.
“There was a particular and unusual combination of factors in these two falls, related to their portfolios” consisting of a small number of customers but with large deposits, in a “rate hike environment” by the central bank ( Fed) to curb inflation, he continued.
The annual conference of the ABA, organized since Sunday in Washington, not far from the White House and the Capitol, coincides with this global banking crisis, but was planned for a long time.
“Until last week, I had planned a completely different speech. (…) I have a long list of priorities and subjects that I wanted to raise with the politicians, on our program for the American banks” , said Rob Nichols.
– Stabilized cash withdrawals –
US Treasury Secretary Janet Yellen also said on Tuesday that “the situation is stabilizing” and that “the US banking system remains solid”.
The device put in place by the Fed to lend money to banks for a week, in order to avoid the debacle, as well as those already existing, “work as planned to provide liquidity to the banking system” and “the withdrawals of “Money from regional banks has stabilized,” noted Joe Biden’s Minister of Economy and Finance, who was speaking at this conference.
The American authorities have taken a series of measures to reassure individuals and companies with regard to the solidity of the American banking system, promising in particular that customers of SVB and Signature Bank will be able to withdraw all of their deposits.
With confidence remaining the main weapon to avert a broad global crisis, Janet Yellen assured that the Biden administration stands ready to act once more if necessary: ”Similar actions may be warranted if smaller institutions experience withdrawal rushes that pose a risk of contagion,” the minister said.
Waves of massive withdrawals caused the liquidation of Silvergate Bank, a small regional bank that became the favorite destination of the cryptocurrency community, then of SVB. And Signature Bank, the country’s 21st bank, was automatically closed.
The First Republic bank, in the hot seat, recovered on Wall Street on Tuesday.
The Fed lent nearly $12 billion to US banks in a matter of days to enable them to meet customer withdrawal requests, as well as $152 billion through its usual very short-term lending program, once morest barely 5 billion the previous week. And $142.8 billion was loaned to the two entities created by US regulators to succeed SVB and Signature Bank.
