Sector turmoil could make US banks ‘more cautious’: Yellen

WASHINGTON

US banks may become more circumspect in granting loans following recent turmoil in the sector, the country’s treasury secretary said in an interview to air Sunday, while still predicting “moderate” GDP growth.    

The financial sector was rocked last month by the dramatic collapse of Californian lender Silicon Valley Bank (SVB).    

SVB’s fall was swiftly followed by the failure of another US regional lender and the merger under pressure of Swiss investment banking giant Credit Suisse with its regional rival UBS.    

It is probable that banks will be “somewhat more cautious” in their operations, including in issuing loans to households and businesses, Janet Yellen will tell CNN in the interview, excerpts of which were released Saturday.    

This could result in a tightening of credit availability, which in conjunction with rate hikes could weigh on economic activity, and could also contribute towards slowing down inflation.    

That said, at a Tuesday press conference Yellen indicated that she had “not really seen evidence at this stage suggesting a contraction in credit.”    

Despite the banking sector turmoil, Yellen told CNN, her forecast for the US economy remained the same: “I think the outlook remains one for moderate growth and a continued strong labor market with inflation coming down.”    

“I’m not seeing anything at this time that is dramatic enough or significant enough in my view to significantly change the outlook,” she said.