(MENAFN) At the National Association for Business Economics (NABE) 39th Annual Economic Policy Conference held in Washington, D.C., US Treasury Secretary Janet Yellen called for a re-examination of banking regulations amid recent failures in the system. Yellen highlighted the loosening of regulatory requirements in recent years, stating that any time a bank fails, it is cause for serious concern. She stressed the need to assess the impact of these deregulatory decisions and take necessary actions in response.
Yellen's comments come in the wake of the collapse of Silicon Valley Bank and Signature Bank, as well as the financial difficulties surrounding Silvergate Bank and First Republic Bank. Last week, she told Senate and House committees that the failure of small banks can trigger the demise of others, and that her agency is prepared to take additional actions amid the banking crisis.
At the NABE conference, Yellen emphasized the importance of re-examining whether the current supervisory and regulatory regimes are adequate for the risks that banks face today. She compared regulation to fire codes, stating that they impose costs on firms but that the costs of proper regulation pale in comparison to the tragic costs of financial crises.
Yellen's call for a re-examination of banking regulations comes as the financial sector faces significant challenges, including rising interest rates, inflation, and supply chain disruptions caused by the COVID-19 pandemic. The collapse of banks and financial institutions can have far-reaching consequences, affecting not only the financial sector but also the broader economy. As such, it is crucial for regulators to ensure that the regulatory framework is robust enough to prevent such failures and mitigate their impact if they do occur.
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