The US banking sector appears to be safe and resilient, though the recent liquidity crisis has an air of uncertainty, the Federal Reserve said on Wednesday
WASHINGTON (Pakistan Point News / Sputnik - 22nd March, 2023) The US banking sector appears to be safe and resilient, though the recent liquidity crisis has an air of uncertainty, the Federal Reserve said on Wednesday.
"The US banking system is sound and resilient," the Fed said. "Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain."
The United States has been enveloped in a banking crisis amid a federal takeover of two commercial banks - Silicon Valley and Signature - and industry help extended to a third bank - First Republic. All three institutions had faced what is commonly referred to as "bank runs" or rapid and massive withdrawals of deposits by customers fearing the safety of their money.
The crisis took on an international dimension last week after the renowned Swiss investment banking Credit Suisse went under and had to be bought by rival and compatriot UBS.
Senior officials have issued repeated assurances over the past two weeks that the US banking sector is secure and unlikely to face another financial crisis like in 2008 as well as that the Federal Deposit Insurance Corp was ready to backstop any customer loss of deposits in the event of a bank takeover.
However, jitters over the solvency of US banks have remained. A fourth bank, PacWest Bancorp, was reported to be in trouble on Wednesday after a 20% run on its customer deposits, requiring a cash infusion of $1.4 billion to keep it afloat.
A study by a group of private economists concluded last week that some 186 US banks may have troubled finances that have not been reported yet, suggesting that the banking crisis in the world's largest economy may be bigger than thought.
