By Andrea Shalal and David Lawder
WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen on Friday urged the incoming Trump administration to chorus from interfering with what she referred to as critically necessary applicable regulation of American banks’ capital ranges, liquidity and risk-taking.
Yellen, who has served as U.S. President Joe Biden’s Treasury secretary since he took workplace in January 2021, stated the present U.S. oversight system was not excellent, and it was reputable to search for methods to scale back its regulatory burden.
But she warned towards taking radical steps that may intrude with wanted oversight or the present system of insuring banks’ deposits, given the lengthy historical past of financial institution failures triggering monetary crises.
“I do not wish to say that precisely what we’ve is totally sacrosanct and could not probably be touched. But I don’t suppose it is damaged. We’ve acquired an excellent system,” Yellen informed Reuters as she prepares handy off to Scott Bessent, President-elect Donald Trump’s nominee to be Treasury secretary.
Trump’s return to workplace has raised the prospect of radical modifications to the federal authorities’s present construction and a regulatory framework put in place over a long time to supervise monetary providers and banking, in addition to digital forex.
“Bankers all the time complain about over-regulation,” Yellen stated. “It’s reputable to search for areas the place the burdens of regulation exceed the advantages and to attempt to redress that. But applicable regulation of capital, liquidity, threat taking and the like are critically necessary to a sound banking system and financial system, and that shouldn’t be interfered with.”
Yellen stated she was troubled by a report that Trump’s transition crew was exploring methods to scale back, merge, and even get rid of the highest financial institution regulators in Washington, however had no particular perception into their plans.
“We’ve seen what occurs when banks are inappropriately supervised,” she stated, referencing the sudden failures of Silicon Valley Bank and Signature Bank in March 2023, and others earlier than them that had “created the potential for a contagious monetary disaster.”
“The classes we discovered from these 100-plus years of historical past is that banks have to be supervised and controlled appropriately to drastically mitigate the percentages of failure; that deposit insurance coverage is a essential aspect in selling security and soundness and confidence within the system, and that there must be sufficient entry to liquidity when banks get in bother,” she stated.
