The US banking system remains sound despite market anxiety over the collapse of Silicon Valley Bank (SVB) and Signature Bank, Treasury Secretary Janet Yellen told members of Congress on Thursday.

The consecutive bank failures are the sector's biggest casualties since the 2008 financial crisis, prompting US authorities to quickly step in to protect depositors.

Amid contagion fears, the US Federal Reserve also announced it would make extra funding available to banks to help them meet the needs of depositors, which would include withdrawals.

"This week's actions demonstrate our resolute commitment to ensure that our financial system remains strong, and that depositors' savings remain safe," Yellen told the Senate Finance Committee.

"I can reassure the members of the Committee that our banking system is sound," she added at the hearing, which covers President Joe Biden's latest budget proposals.

Fears of contagion have spread to Europe, with a market rout forcing Credit Suisse, Switzerland's second-biggest bank, to tap a financial lifeline from the Swiss central bank.

SVB -- the United States' 16th-biggest bank by assets and a key lender to startups in the country since the 1980s -- collapsed after a sudden run on deposits, prompting regulators to seize control on Friday.

On Sunday, the Treasury, Fed, and Federal Deposit Insurance Corporation (FDIC) set out plans to ensure SVB customers would be able to access their deposits, while the Fed introduced a new lending tool for banks in an effort to prevent a repeat of SVB's quick demise.

"We felt that there was a serious risk of contagion that could have brought down and triggered runs on many banks," said Yellen of the situation.

But such intervention required a decision involving top officials -- a majority of the FDIC board, supermajority of the Fed board, and Yellen herself in consultation with the US president.

They had to "determine that the failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences," Yellen said.

SVB had a high reliance on uninsured deposits, and there was a massive withdrawal of deposits that led to liquidity problems.

Asked on Thursday about the issues behind SVB's collapse, Yellen noted that the bank, to meet liquidity needs, had to sell assets that it expected to hold to maturity.

Given the interest rate increases that have occurred, assets including Treasuries had lost market value, she said.

"There will be a careful look at what happened in the bank, and what initiated this problem," Yellen added. (AFP)