The federal reserve as an interesting choice to make. They either keep raising interest rates and let banks continue to have liquidity issues and the banking system approaches collapse, or they grant these banks liquidity by halting the interest rates hikes by allowing the inflation crisis to get worse.
The domino effect of a single bank causing international turmoil tells you the system is rotten to its core.
There is no way they recover from it because it is how the fiat system is designed banks are one of the main things that make fiat systems and if they were to do any thing you suggest they will eventually collapse and it is why a lot of people have been predicting that the fiat system is on the brink of collapsing.