Global stock markets have rebounded after the US and UK governments made fresh assurances over the stability of the banking sector following a string of bank failures.

US stock markets opened higher after Treasury secretary Janet Yellen signalled the Government would protect people’s deposits if another bank were to collapse.

The S&P 500 was trading about 1% higher and Dow Jones trailing closely behind at 0.9% in early Tuesday trading.

In the UK, the FTSE 100 had bounced by more than 1.9%, driven up by gains for top bank shares which had suffered a sell-off in recent days.

NatWest had surged to the top of the blue-chip index with its share price jumping by 7%. Barclays was close behind with shares up 6%, while Standard Chartered and Lloyds were also trading higher.

Ms Yellen is expected to say that overall “the situation is stabilising, and the US banking system remains sound” at a speech for the American Bankers Association on Tuesday.

The remarks follow the collapse of Silicon Valley Bank and Signature Bank earlier this month.

The failures were triggered by depositors rushing to withdraw money amid anxiety over the bank’s health, known as a “bank run”.

And last week, a group of the biggest US banks raised 30 billion US dollars (£24.5 billion) in funds for regional lender First Republic Bank, but its share price still crashed by more than 45% on Monday.

In her prepared remarks, she says the Government’s intervention in the two bank collapses was necessary to “protect the broader banking system”, after promising that all depositors in both banks would be protected.

“Similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion,” she says, indicating that savers would be insured if another bank were to collapse.

Meanwhile, Chancellor Jeremy Hunt told MPs that the UK’s financial system is “fundamentally strong” after facing questions from shadow chancellor Rachel Reeves.

Ms Reeves asked whether the system is “adequate to protect taxpayers and depositors” and if the Government can be confident that no other UK banks are vulnerable to failure.

Mr Hunt replied: “The Government does recognise that there is some volatility in the market but we believe the UK financial system is fundamentally strong and UK banks are well capitalised.

“They now have core capital ratios that are three times higher than before the 2008 global financial crisis but we continue to monitor the situation carefully.”

The Bank of England along with six central banks around the world, including the US Federal Reserve, joined forces on Monday to help contain the spread of the crisis by boosting dollar flows into the financial system.

It means that banks can borrow dollars from the central bank through the course of the seven-day-a-week facility.

But so far, no banks have utilised the swap line, suggesting that stress levels in the UK banking system are currently low.