📈 69% of S&P 500 stocks beating the index - a historic record! Pick the best ones with AI.See top stocks

Yellen expects US regulators to be open to mergers among midsize banks

Published 05/12/2023, 11:53 PM
Updated 05/12/2023, 11:56 PM
© Reuters. US Treasury Secretary Janet Yellen (R) speaks during a meeting with Japan's Finance Minister Shunichi Suzuki at the G7 Finance Ministers and Central Bank Governors' Meeting in Niigata on May 13, 2023.     KAZUHIRO NOGI/Pool via REUTERS

By Andrea Shalal

NIIGATA, Japan (Reuters) - The current banking environment and pressures on earnings of some U.S. regional banks may lead to some concentration in the sector, and regulators will likely be open to such mergers, Treasury Secretary Janet Yellen said on Saturday.

Yellen told Reuters she was not seeing evidence of pressure on smaller community banks, which had a large percentage of insured deposits. She expressed confidence that nearly all banks had access to sufficient liquidity to guard against unexpected deposit outflows from uninsured depositors.

However, she said a certain degree of consolidation in the regional and midsize banking sector could occur. She declined to discuss any specific banks.

"This might be an environment in which we're going to see more mergers, and you know, that's something I think the regulators will be open to, if it occurs," she said in an interview on the sidelines of meetings of finance officials from the Group of Seven rich nations n Japan.

Yellen sought to reassure her G7 partners this week that the U.S. financial system was stable, saying the United States had taken action to strengthen confidence in its banking system after the failure of three regional banks since mid-March.

On Friday she told Bloomberg TV that all three of those banks had tended to have substantial losses and a very high proportion of uninsured deposits but that the overall banking system was well-capitalized and still had "very solid earnings."

Shares of major U.S. regional lenders have been more volatile in recent weeks, with investors still wary about the stability of mid-sized banks.

© Reuters. US Treasury Secretary Janet Yellen (R) speaks during a meeting with Japan's Finance Minister Shunichi Suzuki at the G7 Finance Ministers and Central Bank Governors' Meeting in Niigata on May 13, 2023.     KAZUHIRO NOGI/Pool via REUTERS

The KBW Regional Banking index, which has fallen nearly 14% so far this month, rose 0.39% on Friday, but PacWest Bancorp, which lost 23% on Thursday after reporting a decline in deposits, dropped a further 3%.

Yellen noted that pressure on a bank's stock could unsettle uninsured depositors. "The unfortunate dynamic is that once a bank's stock is under pressure, it can trigger concern among uninsured depositors ... even though the bank has adequate capital and liquidity," she said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.