Treasury’s Yellen delivers speech on state of U.S. financial system

Treasury Secretary Janet L. Yellen delivered a speech at the 2024 U.S. Treasury Market Conference on the financial system’s resilience. Yellen says the financial system has remained resilient despite the COVID-19 pandemic, the Silicon Valley Bank and Signature Bank collapses, and cyber risks.

Addressing the SVB and SB bank failures in early 2023, Yellen says the Treasury identified core weaknesses from the events. “We need greater supervisory attention on banks with less stable deposits, and we need regulations that account for unrealized losses on securities. We also need changes so that banks are better prepared for liquidity stress, such as making sure that they have diverse sources of contingency funding and especially that they have the capacity to borrow at the discount window and periodically test this capacity. This includes considering establishing collateral pre-positioning requirements to facilitate borrowing from the discount window, improving the discount window’s operational capacity, and enhancing coordination between the discount window and the Federal Home Loan Banks.” She continues, “And we also need to support regulators’ efforts to strengthen long-term debt requirements for regional banks so that they can be more effectively resolved if they do fail.”

Yellen says the Treasury has been focused on “cross-cutting risks” of cybersecurity, artificial intelligence and climate. See more on the speech here.