The news: As the banking sector entered into a brief lull, Treasury Secretary Janet Yellen praised financial regulators and discussed what’s in store for the future. The Fed also gave a first look at emergency borrowing stats.
All’s not equal: Last week, Yellen addressed the Senate Finance Committee in her first public comments since the collapse of SVB and the various “non-bailout” bailout actions taken by US financial regulators.
Record-breaking borrowing: The Fed last week also shared some figures on emergency funding requests from banks amid the SVB and Signature Bank fallout.
This extensive borrowing signals that many banks are reeling from deposit withdrawal requests. When considering the full amount of lending, including the bridge loans made to SVB and Signature Banks, the loans erased about half of the balance-sheet reduction that the Fed achieved since it began its course of quantitative tightening last June, per Capital Economics.
The big takeaway: Yellen’s comments on future potential bailouts have undoubtedly left small and midsize banks feeling slighted and on edge. The sector is still fragile, as demonstrated by the still-turbulent stock market. Many banks are turning to one or more of the lending facilities to shore up their balance sheets, but the effects of such programs are unclear. If the Fed continues to hike interest rates, the lending mechanisms could put banks in an even more vulnerable position. All eyes will be on the Fed’s meeting next week to learn what the plan will be moving forward.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
11 Times SquareNew York, NY 100361-800-405-0844