Treasury Secretary Janet Yellen said Thursday that she suspects U.S. banking regulations may have become too loose.
Yellen spoke before the National Association for Business Economics in the wake of this month’s collapses of Silicon Valley Bank (SVB) and Signature Bank—the second and third largest banking failures in U.S. history.
“Regulatory requirements have been loosened in recent years. I believe it is appropriate to assess the impact of these deregulatory decisions and take any necessary actions in response,” Yellen said in prepared remarks.
Following the banks’ collapses, President Biden called on the government to reduce the risk of it happening again. He pointed out that during the Obama Administration regulations were put in place, including the Dodd-Frank Act in 2010 amid the aftermath of the financial collapse of 2008 that led to the Great Recession.
Many of those regulations were rolled back by bipartisan members of Congress in 2018.
Last week, Yellen told members of the American Bankers Association that the banking system is “sound” and that the overall situation “is stabilizing.” And earlier this week, First Citizens Bank entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase “substantially all loans and certain other assets” of failed Silicon Valley Bank.
Since the failures of SVB and Signature, though, some former regulators have said Washington might have focused too heavily on the biggest U.S. banks after 2008—the so-called “too big to fail.”
The Federal Reserve is now reviewing a number of its rules for banks with assets between $100 billion and $250 billion, with an aim toward potentially tighter restrictions. The White House also is preparing recommendations to tighten scrutiny on midsize banks.
In her remarks Thursday Yellen said, “And we would be prepared to take additional actions if warranted” by the state of the banking industry, though she did not specify what those steps might be.
