Yellen Sees Bank Mergers, Earnings Pressure Following March Crisis - Signature Bank (OTC:SBNY)
In a recent interview in Paris, Janet Yellen, the Treasury Secretary, stated that there could be a rise in bank mergers this year due to an increase in interest rates and recent banking troubles. She also added that the costs of keeping depositors are going up, which is adding to this trend.
Yellen shared that a number of lesser-known banks have mentioned that they are dispensing higher interest rates on savings accounts ever since the Federal Reserve started increasing rates rapidly in the previous year. The Wall Street Journal has stated that this practice has persisted even after the fall of Silicon Valley Bank and Signature Bank SBNY in March.
In the course of the interview, Yellen mentioned that the banks are currently experiencing a reduction in their profitability due to the fact that they are paying elevated interest rates for deposits.
Countless financial institutions are currently encountering obstacles as a result of the Federal Reserve's amplified interest rates. The apprehension of their long-lasting profitability has caused a noteworthy reduction in the midsize banks' stocks previously in the year.
Yellen, who heads the Financial Stability Oversight Council, held a meeting with other regulators last week to address issues in the banking industry, with a particular emphasis on hazards related to lending for commercial real estate. Yellen emphasized that the biggest threats stemmed from smaller banks providing loans for office buildings.
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According to the Wall Street Journal, Yellen mentioned that the increase in interest rates has resulted in raised costs for several commercial mortgages. However, she assured that this will not result in a widespread impact from office-building loan defaults, but it could potentially lead to the failure of other banks.
Yellen stated that there could be some challenges resulting from this, but she believes they can be handled properly. According to the report, she expressed confidence that this is not a widespread issue.
Based on the Wall Street Journal, Yellen said that she doesn't anticipate a recurrence of the prior year's instability, despite this, she thinks that poor earnings data in the second quarter could put tension on stock prices and maybe make some banks consider merging.
Yellen expressed her opinion that while it may not be a major danger to the industry, there could potentially be banks that will consider merging in the future.
She believes that further merging of banks could have a positive impact, but Yellen has cautioned against the largest banks expanding further in size.
This week, Yellen has gone to Paris to converse with world leaders about the economic struggles that developing countries are dealing with, particularly those linked to climate change-induced catastrophes.
Take a look at this update: Janet Yellen believes that the chances of the United States entering a recession have decreased, and has said that inflation has substantially decreased as well.
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