‘Contagious bank runs’ to blame for current turmoil, says US Treasury Secretary

The turmoil affecting the world’s financial system was caused by “contagious bank runs”, the US Treasury Secretary has said.

Janet Yellen insisted the recent banking turmoil which has seen the collapse of Silicon Valley Bank and the rescue of Credit Suisse is “different from 2008”.

She insisted the US banking system is “sound even as it has come under some pressure” but added the US Federal Reserve stands ready to intervene in the event of a smaller bank collapse.

Speaking after giving a speech to the American Bankers Association this afternoon, she said the situation was different from 2008, which “was a solvency crisis,” while “what we are seeing is contagious bank runs”.

She said the US Federal Reserve intends to “remain vigilant in the days and weeks to come,” adding it had taken every step to “reassure the public that our banking system is resilient”.

Referring to the collapses of Silicon Valley Bank and Signature Bank, she said: “Our intervention was necessary to protect the broader US banking system, and similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”

Her comments come as global bank stocks have surged after concerns about the takeover of Credit Suisse cooled. 

The blue-chip FTSE 100 index has climbed 2pc today, driven by the rise in banking stocks, which have surged by 4.3pc across the FTSE 350.

NatWest has jumped as much as 7.1pc, Barclays has risen as much as 5.9pc and Lloyds has jumped as much as 4.9pc.