Yellen Highlights Progress Made in Financial Stability

In her testimony before the House Financial Services Committee today, Federal Reserve Chairman Janet Yellen pointed to evidence that the U.S. financial system has “strengthened considerably.” The largest U.S. banks have more than doubled their common equity capital since 2008 and increased high-quality liquid assets by two-thirds since 2012, she said, adding that community banks are also “significantly healthier.”

But while Yellen noted “improved risk management, internal controls and governance” at the largest banks, she said that recent “compliance breakdowns” have undermined confidence in the banks’ risk management practices and controls, which could have potential consequences for financial stability. She warned that they should address these issues “directly and comprehensively.”