“US Treasury Secretary Yellen Warns of Possible Bank Consolidation as Deposits Decline”

News from the Financial Associated Press on May 20 (edited by Bian Chun)In a meeting with chief executives of major banks on Thursday, U.S. Treasury Secretary Janet Yellen told executives that as the industry continues to grapple with the crisis, the media reported, citing people familiar with the matter.More bank consolidation may be necessary。

Yellen met with JPMorgan Chase & Co CEO Jamie Dimon, Citigroup CEO Jane Fraser and other board members of the Bank of America Policy Institute in Washington on Thursday.

In a post-meeting announcement, the U.S. Treasury Department noted that Yellen spoke of strains in the banking sector, reaffirming the “strength and soundness of the U.S. banking system” and thanking bankers for their “leadership and support.” But the announcement made no mention of discussions about a bank merger.

It is worth noting that the Biden administration has been trying to crack down on corporate concentration, and many major mergers and acquisitions have been blocked. However, the worst banking crisis since 2008 has forced US regulators to rethink.

This is not the first time Yellen has made similar remarks. Earlier this week, she said that there may be some consolidation in the regional and mid-sized banking industry. “We’re going to see more bank consolidation. If that happens, I think regulators will be open to it,” she said.

However, earlier this week, JPMorgan Chase CEO Jamie Dimon said the bank is unlikely to buy another struggling bank.

Earlier this month, First Republic Bank became the third major U.S. financial institution to fail in two months. JPMorgan then outbid other banks for most of First Republic’s assets.

Are the bank failures over?

U.S. regional bank stocks fell under pressure on Friday, dragged down by Yellen’s remarks,Reversed the sharp rebound in the first few days of this week。

The KBW regional bank index fell 2.2 percent, led by shares in PacWest Bancorp and Western Alliance , down 1.9 percent and 2.4 percent, respectively. Shares of Comerica Inc. fell 1.2 percent; Zions Bancorp. fell nearly 1.7 percent; and Silicon Valley National Bancorp fell 5.5 percent.

According to market analysis, Yellen’s speech means that more banks may fail soon.

“(Bank) consolidation is inevitable,” said Ed Mills, Washington policy analyst at Raymond James, a US investment bank.

Newly released data showed deposits at U.S. banks fell for a third straight week in the week ended May 10, hitting the lowest level in nearly two years, as clients continued to turn to money market funds for higher returns.

At the same time, the Federal Reserve continues to “infuse blood” for banks, with outstanding loans totaling $96.1 billion in the week ended May 18, up from $92.4 billion the previous week.

A recent report on the vulnerability of the U.S. banking system pointed out that many U.S. banks, like Silicon Valley Bank, hold a large amount of unencumbered deposits. Under the current economic environment, if half of the depositors decide to withdraw their unprotected deposits, it is estimated that 186 banks in the United States may become insolvent due to a run on their debts, and “collapse” like Silicon Valley Bank.