The Biden administration on Friday reacted to the largest failure by a US lender in more than a decade, offering its assurance that the US financial system would weather fallout from the collapse of Silicon Valley Bank and that regulators were closely monitoring developments.
Treasury Secretary Janet Yellen said she had “full confidence in banking regulators to take appropriate actions in response,” adding that regulators “have effective tools” to address the situation.
Yellen called a meeting Friday with leaders from the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency to discuss developments around SVB, the Treasury said in an emailed statement.
White House officials also weighed in, saying the US banking system was benefiting from reforms implemented following the 2008-09 financial crisis.
“Our banking system is fundamentally different” compared to 2008, Cecilia Rouse, chair of the Council of Economic Advisers, told reporters. “We knew that we had to build more resilience into our banking system, which allows it to withstand these kinds of shocks.”
The Dodd-Frank Act, passed by Congress in 2010, imposed tougher capital and liquidity requirements on banks, and subjected the largest banks to a special set of rules, including annual stress tests.
Rouse wouldn’t comment on what might happen to deposits at SVB that exceeded the federally insured limit of $250,000 and referred the question to the FDIC.
Regulators stepped in and seized SVB Friday in a stunning downfall for a lender that had quadrupled in size over the past five years and was valued at more than $40 billion as recently as last year. That followed a tumultuous week that saw an unsuccessful attempt to raise capital and a cash exodus from the tech startups that had fueled the lender’s rise.
Just days earlier, Silvergate Capital Corp. also announced it was shutting down its bank.
The combination triggered a broader selloff in stocks. The Treasury statement appeared aimed at reassuring financial markets and preventing a wider investor panic.
In the US, Thursday was the worst day for the KBW Bank Index since June 2020, as its members shed more than $90 billion of value. The biggest banks in Europe lost more than $40 billion from their market capitalizations on Friday.
The agency heads Yellen convened Friday are all members of the Financial Stability Oversight Council, a body of regulators charged with monitoring risks to US financial stability.
Fortune's CFO Daily newsletter is the must-read analysis every finance professional needs to get ahead. Sign up today.
