FRB Vice Chair Janet L. Yellen Delivers Speech at the International Monetary Conference: "Regulatory Landscapes: A U.S. Perspective"

Janet L. Yellen, Vice Chair of the Board of Governors of the Federal Reserve System, gave a speech discussing domestic and international regulatory reform efforts in the wake of the financial crisis. After summarizing the progress that the Federal Reserve and other regulators have made in recent years, Vice Chair Yellen discussed the "principal pieces of unfinished business" in global financial regulatory reform, which she divided into the following categories:

• Strengthening the basic bank regulatory framework: Vice Chair Yellen highlighted the need to continue supporting the efforts of the Basel Committee, stating that the "stability of the global financial system depends critically on the capital adequacy of global banks," and "the capital adequacy of global banks depends critically on the Basel III reforms."

• Reducing the probability of failure of systemically important financial institutions ("SIFIs"): Vice Chair Yellen stated that, while she was not persuaded "blunt approaches" such as resurrecting Glass-Steagall-style restrictions or bank size limits would be the most efficient way of addressing the too-big-to-fail problem, she was not convinced that the existing SIFI regulatory work plan goes far enough. She suggested, additionally, that forcing full internalization of the social costs of a SIFI failure may require capital surcharges beyond those put forward by the Basel Committee.

• Improving SIFI resolvability: Vice Chair Yellen stated that the key obstacles which policymakers must overcome to maximize the prospects for an orderly resolution of a SIFI are that (i) each major jurisdiction must adopt a statutory resolution regime for financial firms consistent with the Financial Stability Board's "Key Attributes," (ii) policymakers need to ensure that all SIFIs maintain a sufficient amount of total pre-failure and post-failure loss absorption capacity, and (iii) policymakers must find concrete and credible solutions to cross-border obstacles that impede the orderly resolution of a global SIFI.

• Reducing systemic risk in the shadow banking system: Vice Chair Yellen emphasized the need to increase the transparency of shadow banking markets and to take further steps to reduce the risk of runs on money market mutual funds.

Click here to view speech in full (links externally to Federal Reserve website).