Strengthening the Regulation of Shadow Banking
Yellen also called for more robust regulation of the non-bank, or "shadow bank," sector, which has grown in recent years.
Revisiting Deregulatory Decisions for Smaller Banks
The Treasury Secretary suggested re-evaluating the 2018 rollback of bank capital requirements and increased supervision for smaller and mid-size banks with assets below $250 billion. Yellen expressed concern about the impact of deregulatory decisions and urged appropriate actions in response to bank failures.
Post-2008 Crisis Reforms: Successes and Unfinished Business
Yellen acknowledged the effectiveness of regulatory reforms implemented after the 2008 financial crisis, which helped the U.S. financial system withstand shocks like the COVID-19 pandemic. However, she also pointed out that the recent failures of two regional banks indicate more work to be done.
Assessing the Adequacy of Current Regulatory Regimes
The Treasury Secretary emphasized the importance of evaluating whether the existing supervisory and regulatory regimes are sufficient for managing the risks banks face today. She called for action to address any identified risks as necessary.
Preparedness to Protect Depositors in Future Failures
Yellen reiterated that the Treasury, Federal Reserve, and FDIC are ready to use the same tools they employed to safeguard depositors in the SVB and Signature Bank failures. She added that additional actions would be taken if warranted without specifying potential steps.