SVB collapse to test Fed’s faith in a strong, low-risk financial system

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By Howard Schneider WASHINGTON (Reuters) – Earlier this month the U.S. Federal Reserve in a report to Congress gave what has become a standard reassurance: Banks were strong and the overall financial system in solid shape. That confidence is now being tested as the Fed and other regulators navigate Friday’s collapse of Silicon Valley Bank — the sort of event that can seem to be without implications for the broader economy until the full scope and potential impact on market psychology become clear. Regulators on Sunday were working on a response to contain any fallout from the bank’s collapse,…

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