Fed Vice Chair Yellen: Progress Made, but More Work Needed on Global Reform
During a June 2 speech in China, Federal Reserve Vice Chair Janet Yellen summarized "considerable progress" since 2008 toward building a more resilient global financial system, and she offered her perspective on what remains to be done regarding global financial regulatory reform.
Financial crisis exposed shortfall
The financial crisis also highlighted the need for international bank rules to focus more on the potential threat to financial stability caused by SIFIs, particularly those that may be considered "too big to fail," Yellen said. Along with the Basel Committee, Federal Reserve actions have played a key role in reducing the likelihood of failure for these institutions, Yellen said.
Focusing on SIFIs
In particular, the Fed in December 2011 proposed a broad set of enhanced prudential standards for large U.S. bank holding companies. Yellen noted that the Fed also now performs rigorous annual stress tests and capital plan reviews of the largest banking companies to ensure that the companies can keep functioning and lending during periods of severe economic and financial stress.
U.S. and global regulators have worked to strengthen the capacity of financial markets and infrastructure to absorb shocks, such as the financial crisis, and to reduce the damage to the financial system and the economy if a major financial firm fails.
Looking ahead, Yellen said global financial regulators need to address three areas of "unfinished business":
June 20, 2013