The U.S. banking sector "remains strong, resilient, well-capitalized, has liquidity," said Rob Nichols, head of the Association of American Banks (ABA), which represents the interests of U.S. banks of all sizes.

Americans "can have confidence in the American banking system," he said, before a room full of bank executives.

The collapse of Silicon Valley Bank (SVB) and Signature Bank just two weeks ago have raised a wave of concern in the global banking sector. The latest episode was the emergency takeover of the Swiss bank Credit Suisse on Sunday by its compatriot UBS.

However, global markets seemed reassured on Tuesday, with stock markets rebounding in both Europe and the United States. The various governments and monetary authorities have indeed provided strong responses to reassure on financial soundness, and thus avoid at all costs a risk of contagion.

The U.S. banking system is made up of the large banks whose names are known internationally and dominate Wall Street, but also a network of smaller banks, regional or local.

And according to Rob Nichols, their situation is very different from that of SVB and Signature Bank: "these banks and their business model are not representative of the thousands of other banks in this country".

"There was a particular and unusual combination of factors in these two falls, related to their portfolios" consisting of a small number of clients but with large deposits, in an "environment of rising rates" by the central bank (Fed) to curb inflation, he continued.

The annual conference of the ABA, held since Sunday in Washington, not far from the White House and the Capitol, coincides with this global banking crisis, but was planned for a long time.

"Until last week, I had planned a completely different speech. (...) I have a long list of priorities and topics that I wanted to discuss with policymakers about our agenda for U.S. banks," Nichols said.

Stabilized cash withdrawals

U.S. Treasury Secretary Janet Yellen also said Tuesday that "the situation is stabilizing" and that "the U.S. banking system remains strong."

The device put in place by the Fed to lend money to banks for a week, in order to avoid the debacle, as well as those already existing, "work as expected to provide liquidity to the banking system" and "withdrawals of money from regional banks have stabilized," noted Joe Biden's Minister of Economy and Finance, who was speaking at this colloquium.

The chief executives of the regional banks United, Zions and Jonesburg State in Washington on March 21, 2023 © Jim WATSON / AFP

The US authorities have taken a series of measures to reassure individuals and businesses about the soundness of the US banking system, promising in particular that SVB and Signature Bank customers will be able to withdraw all of their deposits.

With trust remaining the main weapon to avoid a vast global crisis, Janet Yellen assured that the Biden administration stood ready to act again if necessary: "similar actions could be justified if small institutions suffer scrambles for withdrawals that pose a risk of contagion," said the minister.

Waves of massive withdrawals caused the liquidation of Silvergate Bank, a small regional bank that became the favorite destination of the cryptocurrency community, then SVB. And Signature Bank, the country's 21st bank, was shut down automatically.

The bank First Republic, in the hot seat, recovered Tuesday on Wall Street.

The Fed lent nearly $12 billion to U.S. banks in a matter of days, to enable them to honor their customers' withdrawal requests, as well as $152 billion through its usual program of very short-term loans, compared to just $5 billion the previous week. And $142.8 billion was lent to the two entities created by US regulators to succeed SVB and Signature Bank.

© 2023 AFP