Regional Banks, Pop Terms

Can Yellen Avoid a Regional Bank Run?

During Treasury Secretary Janet Yellen’s meeting with the CEOs of large banks on Thursday, May 18, 2023, she told the executives that more bank mergers might be necessary as the industry navigates the banking crisis.

In comments today, she said that more banks would probably merge during 2023 as interest rates continue to climb.

Many banks are losing customers because their investments in low-paying bonds don’t allow them to compete with savings accounts and Certificates of Deposits (CDs), now paying over 5%.

Further, these banks are losing mortgage business because of the relatively higher interest rates for those products.

There also continues to be a big question mark if the US federal government will continue to backstop accounts over the Federal Deposit Insurance Corporation’s (FDIC‘s) $250,000 limit should a bank fail. Earlier this year, this was the initial impetus for the regional bank run.

To add to these issues, banks’ exposure to commercial loans is currently unknown.

For individuals and families needing good-paying investments that are relatively low-risk and liquid, consult your financial advisor about investing in high-yield savings accounts and CDs if they fit within your financial plans, risk tolerance, and FDIC limits.