The governor of the Federal Reserve (Fed), Jerome Powell, has begun his appearance to explain the decision to raise interest rates with a loud and clear message for the financial sector in relation to the recent crisis among banks due to the depreciation of their bond portfolios, confidence issues about some entities and deposit leaks from each other.
“Serious difficulties have arisen in the last two weeks in a small number of banks. History has shown that isolated banking problems, if left unaddressed, can undermine confidence in healthy sucos and threaten the ability of the banking system in banto to play its vital role in supporting the savings and credit needs of households and businesses,” the Fed Chairman said.
The Fed, on its measures for banks: “It is effectively meeting the unusual financing needs that some banks have faced, and makes it clear that there is sufficient liquidity available in the system.”
Powell recalls that the Fed, in collaboration with the Treasury and the FDIC supervisor, took extraordinary measures in bailing out depositors at Silicon Valley Bank (SVB Financial), Signature Bank and, later, First Republic Bank to “strengthen confidence in the public in our banking system”, in the words of the governor, “actions demonstrated that the savings of all depositors in the banking system are safe”
With Treasury support, the Fed created the Bank Term Financing Program (BFTP) to ensure that banks that have safe and liquid assets can, if necessary, borrow against those assets at par,” that is, with the issue value and not with the current price of those before they mature, which is why the SVB incurred losses and as a consequence the episode of bank panic bonds two weeks ago Powell recalled that the supervisory arm led by Michael Barr last a report on what happened.
“This program, together with our discount window, is effectively meeting the unusual funding needs that some banks have faced, and makes it clear that there is sufficient liquidity available in the system. Our banking system is sound and resilient capital and solid liquidity”, underlines Powell who insists that the Fed continues to monitor the situation and will use “all the tools” at its disposal to deal with it.