Silicon Valley Bank's headquarters in Santa Clara, Calif., on Monday, March 13, 2023. (AP)

After the recent failures of Silicon Valley Bank and Signature Bank rattled the industry, the US banking sector is "stabilizing," Treasury Secretary Janet Yellen will state at the summit on Tuesday, according to already prepared remarks.

A crisis of confidence was triggered by the collapses, with many customers withdrawing their money and depositing it in larger institutions, considered too big for the government not to bail them out if faced with failure. However, "aggregate deposit outflows from regional banks have stabilized" following authorities' moves to shore up confidence and stem contagion, according to Yellen's remarks.

"Our intervention was necessary to protect the broader US banking system," she will say in a speech to the American Bankers Association's Washington DC summit, adding that similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion."

Following SVB's collapse, the US Treasury, US Federal Reserve, and US Federal Deposit Insurance Corporation set out plans to ensure the bank's customers would be able to access their deposits. A similar exception was announced for Signature Bank.

The Fed additionally introduced a new lending tool for banks in an effort to prevent a repeat of SVB's quick demise, and has since launched a drive with other major central banks to improve banks' access to liquidity.

Reduced risk

Yellen supposedly believes that the Fed's actions reduced the risk of further bank failures, and she maintains that the US banking system remains sound. However, there is a clear fear over which lender could be the next domino to fall, with 11 US banks announcing they would deposit $30 billion into the First Republic amid worries surrounding the bank.

Midsized US banks asked federal regulators to guarantee all their customers' deposits for two years, a move that could help halt an "exodus of deposits" from smaller banks, according to Bloomberg on Saturday.

In order to ease fears, financial authorities have been scrambling while worries of contagion spread to Europe, as Switzerland's second-biggest bank Credit Suisse was in trouble. Since then, rival UBS has agreed to take over Credit Suisse in a government-brokered deal after days of market upheaval.

Both the US and European markets picked up on Monday, but analysts say investors remain wary. That said, she is set to reassure bankers of the Treasury Department's commitment to safeguarding the "health and competitiveness" of the community and regional banking institutions.

"You should rest assured that we will remain vigilant," according to her speech.