Yellen chairs meeting of FSOC regulators amid banking turmoil

By - Reuters

By David Lawder

WASHINGTON (Reuters) - U.S. Treasury Secretary Janet Yellen chaired a closed meeting of the Financial Stability Oversight Council on Friday, the Treasury said as markets continued to seesaw amid concerns that a two-week-old banking crisis could worsen.

The Treasury said in a media advisory that the meeting was scheduled for Friday morning, and thus far it has not provided any details or readout of its conclusions.

The meeting comes two weeks after regulators closed Silicon Valley Bank, whose failure kicked off a bank crisis of confidence marked by the threat of bank runs and uninsured deposits fleeing smaller and regional institutions for larger banks perceived as "too big to fail."

The body of financial regulators, led by Yellen and including the heads of the Federal Reserve, the Federal Deposit Insurance Corp (FDIC), the Securities and Exchange Commission and other regulatory agencies, last met on March 12.

That was the same day that the FDIC, Fed and Treasury announced emergency actions to backstop all deposits in the two failed banks and create a new Fed lending facility to boost liquidity for all banks.

A Treasury readout at the time said the actions were described to the broader council, noting that the Fed facility "will bolster the capacity of the banking system to safeguard deposits."

Two prominent House of Representatives Republicans on Friday demanded that Yellen provide them with additional information about the March 12 meeting, including unredacted minutes, votes, details on timing and bank stress test results.

"The events that have transpired over the last 12 days related to both Silicon Valley Bank and Signature Bank, the ensuing market instability, and your role raise a number of questions for policymakers," wrote Representatives Bill Huizenga and Andy Barr who chair House Financial Services subcommittees, in a letter to Yellen.

They added that the basis of the Treasury, Fed and FDIC determinations in the SVB and Signature cases "are of particular importance."

The Friday FSOC meeting came as global banking contagion fears again caused European bank stocks to fall sharply, with Deutsche Bank and UBS knocked by worries that regulators and central banks have not yet contained the worst shock to the sector since the 2008 global financial crisis.

But on Wall Street, shares recovered from an earlier sell-off as three Federal Reserve bank presidents said in separate remarks that there was no indication that financial stress was worsening this week, allowing them to raise interest rates by a quarter percentage point.

Yellen again sought to calm fears of further bank deposit runs on Thursday, telling U.S. lawmakers that she was prepared to repeat actions taken in the Silicon Valley and Signature Bank failures to safeguard uninsured bank deposits if failures threatened more deposit runs.

Those actions to invoke "systemic risk exceptions" were taken by Yellen, President Joe Biden, the FDIC, and the Fed, which supervised Silicon Valley and Signature.

(Reporting by David Lawder; additional reporting by Pete Schroeder; Editing by Chizu Nomiyama, Jonathan Oatis and Diane Craft)