The US Federal Reserve expressed confidence earlier this month in the strength of banks and the financial system in a report to Congress. However, that confidence has been put to the test with Friday's collapse of Silicon Valley Bank (SIVB.O). Regulators are working to contain any fallout and prevent any further damage to the overall system. Measures include potentially backing up all deposits at the failed bank, even uninsured ones.

The US Federal Reserve has tools to shoring up the financial system and response was swift when the Coronavirus pandemic hit. Loan volumes from the “discount window” jumped from near zero to about $50 billion in a matter of weeks. The Fed has also shown a willingness to react quickly to potential problems in the past.

The collapse of SVB highlighted whether the Fed's aggressive rate increases finally caused something important to 'break' as holders of low-yielding Treasury