Yellen warns incoming Trump team against interfering in bank supervision

Yellen argues against overhauling bank supervision

She highlights the importance of bank supervision to prevent crises

US banks are thriving despite Dodd-Frank regulatory concerns

Andrea Shalal, by David Lauder

WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen on Friday urged the incoming Trump administration to refrain from interfering with critical proper regulation of U.S. banks’ capital levels, liquidity and risk taking.

Yellen, who has served as US President Joe Biden’s Treasury secretary since he took office in January 2021, said the current US oversight system was not perfect, and it was legitimate to look for ways to reduce its regulatory burden. Was.

But given the long history of bank failures causing financial crises, he warned against taking radical steps that would interfere with necessary oversight or the existing system of insuring banks’ deposits. “I don’t want to say that everything we have is absolutely sacrosanct and can’t possibly be touched. But I don’t think it’s broken. We have a good system,” Yellen told Reuters. Told when she was preparing to hand over the handover to newly elected President Donald Trump’s nominee for the post of Treasury Secretary, Scott Besant.

Trump’s return to office raises the possibility of an overhaul of the current structure of the federal government and the regulatory framework established for decades to oversee financial services and banking, as well as digital currency.

“Bankers always complain about over-regulation,” Yellen said. “It is legitimate to look for areas where the burden of regulation outweighs the benefits and try to redress that. But appropriate regulation of capital, liquidity, risk taking, etc. is critically important for a strong banking system and economy, And that shouldn’t be interfered with.” Yellen said she was troubled by a report that Trump’s transition team was looking for ways to reduce, merge or even eliminate the top bank regulators in Washington, but that she felt comfortable with their plans. There was no specific information.

“We have seen what happens when banks are improperly supervised,” he said, referencing the unexpected failures of Silicon Valley Bank and Signature Bank and other banks before them in March 2023, which raised “the possibility of a contagious financial crisis.” Was born.”

“The lesson we have learned from those more than 100 years of history is that banks need to be appropriately supervised and regulated to reduce the chances of failure; to promote safety and soundness and confidence in the system.” Deposit insurance is an important element for banks, and he said, “There must be adequate access to liquidity when banks are in trouble.”

Yellen said U.S. banks are doing “exceptionally well” despite warnings that the Dodd-Frank law passed after the 2008–2009 global financial crisis would make it difficult for them to compete.

This legislation resulted in the creation of the Financial Stability Oversight Council, the Federal Reserve’s Financial Stability Division, and Treasury’s Office of Financial Research to anticipate and assess threats to financial stability. Yellen, who led the Fed from 2014 to 2018, agreed that the US has a complex system of banking regulation that involves multiple agencies at the state and federal levels. He said there had been discussions for years about possible consolidation steps at the federal level, and that the Office of Thrift Supervision was eliminated after the global financial crisis without any adverse effects.

But he also said changing the structure of the system was not at the top of his agenda.

This article was generated from an automated news agency feed without any modifications to the text.