Yellen Says Banking System Healthy Despite Regional Woes

In two months, almost to the date, we've had four U.S. lenders fail. But the administration continuously says that the banking sector is sound and resilient. Is that a fair assessment when you look at the regional banking sector? Well, the regional banks have been under some stress, but I think the banks that have failed have had some very unique characteristics that have made them vulnerable. The banks that failed tended to have substantial losses, mark-to-market losses on their hold-to-maturity portfolio. So although their regulatory capital wasn't impaired, their tangible equity was diminished.

And they simultaneously had a very high proportion of uninsured deposits. And that profile is not very common. But look, a lot of banks, particularly regional banks, are seeing their earnings come under pressure. The amount that they're having to pay for deposits is rising. And in many cases, their investments are at lower interest and their stock prices are coming under pressure. But most banks now, even including the ones that are seeing pressure on their stock prices, have solid liquidity, would be able to manage paying off uninsured depositors if they were to flee. Are you confident no other regional or small lenders will fail? Well, look, I don't want to talk about the situations of individual banks, but what I see is a banking system that overall is well-capitalized, still has very solid earnings, and we've improved the available liquidity to the banking system and think that banks are going to be able to survive this.

But, you know, we're monitoring the situation very, very carefully.

Bloomberg