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| The sudden collapse of US bank SVB has raised alarm bells about the risk of a global recession. (Source: Getty Images) |
On June 26, US Treasury Secretary Janet Yellen predicted that many US banks will likely merge due to high interest rates.
According to the ministry, many banks in the US are having difficulty paying off deposits for customers, especially in the context of high federal interest rates.
Some small banks are paying more interest on savings accounts after the Federal Reserve began steadily raising interest rates, a trend that has continued since the Silicon Valley and Signature Bank bankruptcies in March 2023.
Small banks have also been hit hard as depositors have become nervous and shifted their money to more reliable financial institutions, a move that has contributed to a significant drop in small banks’ profits.
Some commentators see Ms. Yellen's forecast as a sign that regulators are also preparing for the possibility of a return of financial crises.
Secretary Yellen said she did not expect the turmoil to recur, but that weak second-quarter US GDP would likely put pressure on stock prices, forcing some smaller banks to consider mergers.
Such a merger would help stabilize financial markets, but would also make the leading financial institutions even more powerful.
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