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Yellen warns bank deregulation may have ‘gone too far’ after SVB failure

Secretary of the Treasury Janet Yellen On Thursday, it warned that weeks of turmoil within the banking industry may indicate that efforts to roll back regulations put in place after the 2008 financial crisis have gone “too far”.

In remarks ready to be submitted to the National Association for Business Economics, Yellen noted that additional guardrails may need to be put in place, including: The Shocking Collapse of Silicon Valley Bank And the signing bank in early March.

“These events are a reminder of the urgent need to finish the unfinished business, complete post-crisis reforms, consider whether deregulation may have gone too far, and the recent shocks reveal to repair the cracks in the regulatory boundary that have become,” she said. Copy of speech.

Yellen says more steps will be taken to protect smaller banks if needed

Treasury Secretary Janet Yellen testifies at a House Ways and Means Committee hearing on the administration’s proposed budget for fiscal year 2024 on March 10, 2023, in Capitol Hill, Washington, DC. (AFP/Getty Images via Brendan Smiarowski/Getty Images)

parliament approved A radical overhaul of the financial system in the years following the Great Recession that reshaped the banking industry. However, MPs passed a bipartisan bill in 2018 that would dismantle some of these banking rules. This was seen as a big win for small and medium banks at the time.

The rollback eased regulations on some of the big banks, gave consumers the right to lift their credit freezes, and eased the Volcker Rule that barred banks from making proprietary investments with their customers’ deposits. , small banks were bailed out.

It also raised the asset threshold at which banks face a mandatory stress test from $50 billion to $250 billion.

Fund managers fear a systemic credit crisis could destroy US markets

The Biden administration is reportedly preparing to ask federal bank regulators to impose new rules on midsize banks. Washington Postciting two people familiar with the debate.

Silicon Valley Bank

Employees walk in front of a sign outside the closed Silicon Valley Bank (SVB) headquarters in Santa Clara, Calif., March 10, 2023. (Justin Sullivan/Getty Images/Getty Images)

“Regulatory requirements have been relaxed in recent years,” Yellen said Thursday. “We believe it is appropriate to assess the impact of these deregulation decisions and take necessary actions accordingly.”

Regulators have scrambled to contain the impact after the collapse of SVB and signatory banks, including protecting all deposits of financial institutions. $250,000 insurance limit. The Federal Reserve also launched a new emergency backstop for lenders to help them meet deposit withdrawals on favorable terms.

The move was meant to stem the flow of money from small and rural U.S. lenders as customers rushed to banks deemed too big to fail.

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But banks still feel the pain of industry-wide disruption.

“It’s worth noting that neither of these events triggered the worst-case scenario of a financial collapse that we saw in 2007 and 2008,” Yellen said. “This is largely due to the post-crisis reforms we implemented. It didn’t, which means more work is needed. The end.”

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