Her reassurance came at the top of a hearing Thursday, before a subcommittee of the House Appropriations Committee, when she read prepared remarks that were almost identical to what she delivered a day before in the Senate, but added: “Certainly, we would be prepared to take additional actions if warranted.”

That appeared aimed at avoiding a repeat of the market volatility when she said Wednesday that Treasury officials had neither considered nor examined the possibility of expanding federal insurance temporarily to all US bank deposits without congressional approval.

Yellen’s fresh comments come amid close scrutiny of how regulators have responded to series of bank failures and rising concerns about the stability of financial system. She and Federal Reserve Chairman Jerome Powell have said since the collapse of Silicon Valley Bank earlier this month that regulations need to be strengthened, while stressing the banking system is sound. 

While policymakers are still on watch for signs of banking instability, the issue didn’t appear to be a top agenda item for the House subcommittee members on Thursday, who only briefly touched on the topic while spending most of the hearing asking Yellen, and White House Budget Director Shalanda Young, about the deficit and debt ceiling. 

Investors had been looking for clarity on the readiness of regulators to backstop bank deposits after sudden outflows contributed to the collapse of multiple US regional lenders this month. The KBW Bank Index on Thursday ended down 1.7% after fluctuating when Yellen’s prepared remarks were released.

Seeking Clarity

The day before, Yellen had said that to guarantee all deposits nationwide would require legislation, although regulators were prepared to repeat — on a case-by-case basis — depositor rescues if an individual bank failure threatened to provoke a wider contagion of bank runs.

According to Andy Laperriere — head of US policy for investment bank Piper Sandler & Co. and a former adviser to ex-House Republican leader Dick Armey — only Congress can alter the Federal Deposit Insurance Corp.’s current $250,000 cap on deposit insurance.

On Tuesday, speaking to the American Bankers Association, Yellen had said regulators stood ready to repeat the steps they took earlier this month when California’s SVB and New York’s Signature Bank shut their doors in the face of overwhelming depositor runs. In those cases, to prevent contagion, the FDIC invoked the so-called systemic-risk exception to guarantee all deposits at those banks.

Treasury officials have been reviewing whether regulators could expand federal insurance temporarily to all US bank deposits, Bloomberg News reported earlier this week. That had encouraged some observers to think the government may make it a sweeping shift in policy.