US Bank Merger Option Open Regulator

US Treasury Secretary Janet Yellen, right, talks with UK Treasury Secretary Jeremy Hunt, not pictured, on the sidelines of the G-7 Finance Ministers and Central Bank Governors Meeting at the Toki Messe convention center in Niigata, Japan, Saturday, May 13, 2023 ., NIIGATA — The current banking ecosystem and pressure on the earnings of some United States (US) regional banks may cause some concentration. US Treasury Secretary Janet Yellen revealed regulators may be open to US bank mergers.

Yellen told Reuters, Saturday (13/5/2023), that he saw no evidence of pressure on the smaller community banks that had a large percentage of insured deposits. Yellen expressed confidence that nearly all banks have access to sufficient liquidity to prevent unexpected outflows of deposits from uninsured depositors.

However, Yellen said a certain degree of consolidation in the regional and mid-sized banking sector could occur. “This is probably an environment where we’re going to see more mergers and that’s something I think regulators will be open to, if that happens,” Yellen said.

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

Shares of major US regional lenders have been more volatile in recent weeks. Meanwhile, investors are still wary of the stability of medium-sized banks.

The KBW Regional Banking Index fell nearly 14 percent so far this month or increased 0.39 percent on Friday (12/5/2023). While PacWest Bancorp lost 23 percent on Thursday (11/5/2023) after reporting a decline in deposits or a further three percent decline.

Yellen noted that pressure on bank shares could unsettle uninsured depositors. “The unfortunate dynamic is that bank stocks are under pressure and that could spark concern among uninsured depositors even if the bank has sufficient capital and liquidity,” Yellen said.


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