Federal Reserve Chairman Jerome Powell said Wednesday that the U.S. banking system remains “sound and resilient” following the second- and third-largest bank failures in the nation’s history.

Silicon Valley Bank and Signature Bank collapsed earlier this month amid a run on the banks. The Fed responded by protecting all deposits and boosting its lending to ensure banks can fulfill customer withdrawals. 

“Our banking system is sound and resilient with strong capital and liquidity,” Powell told reporters. “We are committed to learning lessons from this episode, and to work to prevent events like this from happening again.”

The Federal Open Market Committee (FOMC) unanimously approved a 0.25 percent interest rate hike on Wednesday, even as financial analysts warned that higher rates contributed to the bank collapses by hurting the value of long-term assets held by institutions.

“At a basic level, Silicon Valley Bank management failed badly,” Powell said. “They grew the bank very quickly, they exposed the bank to significant liquidity risk and interest rate risk, they didn’t hedge that risk.”

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Powell said that the committee considered pausing rate hikes, but found that another increase was needed to address hotter-than-expected inflation data. Prices rose 6 percent annually in February, according to Labor Department data. 

Silicon Valley Bank
Security admits a man to the lobby as customers queue up outside the collapsed Silicon Valley Bank in Santa Clara, Calif., on March 13, 2023. President Biden assured Americans that the U.S. banking system is safe.

Some lawmakers have blamed the Fed for failing to address Silicon Valley Bank’s weaknesses before the bank collapsed.

Powell said Wednesday that Fed supervisors identified the bank’s issues, but weren’t able to prevent the bank failure.

“We’re undertaking a thorough internal review that will identify where we can strengthen supervision and regulation,” Powell said.

Financial experts have expressed concern that the banking crisis could spread, causing more institutions to go under. San Francisco-based First Republic Bank is seeking funding to stay afloat. 

Treasury Secretary Janet Yellen told bankers on Tuesday that the situation is “stabilizing.” She said that regional banks are seeing fewer outflows after the Fed injected money into the banking system.