Remarks by Secretary of the Treasury JAnet L. Yellen at the 2024 U.S. Treasury Market Conference

As prepared for deliver

That of you for the into the into the into the into thes, the Intropset. I'm very glad that I'm. YS to FURTHER IMPROVE The Functioning and Resiliation of the Treasury Market, Which is of CourseCore to the functioning and Resiliation of the U.S. Financial System as a WHOLE. And this makes it a file for me to share my whole I And my. Gues Across the Biden-Harris Administration Have Done to Navigate Financial Stresses and Streangthen TheU.S. Financial System Over The Past Three and A Half Years. In my remarks today, I'm address why this work is so important, Our Approach to Achieving A Healthy and Resilient Financial system, and what we've accoming.

I'm. em to u.s. Economic Prosperity. I've Seen Through Many Business Cycles and Financial Stresses that a Strong, Dynamic, and ANDResilient Financial System is key to a strong, dynamic, and resilient economy.

When the Financial System Works as it should, it Helps American HouseHolds Finance Home Purchase and Save Their Children's Educations. Get the Capital they need to grow and hire and to invest in New InnovationsMumbai Wealth Management. It Allows HouseHolds and Businesss to ManageTheir risks so that they're prepared for the future.

Our Strong Financial System was Crucial to our history, with bank continue to leave and provide other, pandemic. Now, Our Financial System is Crucial to Our Medium-And Long-Term Economic Agenda, SUPPORTING The RecordGrowth in New Business Applications We've Seen Under This Administration and the Massive Investments in Infrastic, Clean Energy, And Manufacturing That AT TH E heart of the strategy've calld modeln support-size economics.

WE Should Also Next FORGET What HAPENS When the Financial System Does Not Works It Should. During the Global Financial Crisis, The Collapse of Large And Complex Fin Ancial Institutions and Fragile Short-Term Funding Markets Spread Stresses Through the Financial System and THEN to the RealEconomy. More than eight million Americans Lost Their Jobs, The UNEmployment Rate Rate to 10 Percent, and The Network of American HouseHolds Fell by More than TRILL Ion. Recession was the deepest since world war, lasting six quars.

All of this leaves no question about the need for a resilient Financial system. But in january of 2021, I stepped into a time department white Ability had all but disappeared. I KNew that this less lead to devastating results for American Families,Businesses, and Financial Institutions. So, I worked to Restore Our Government's Focus on Financial Stability and To CRAFT An APPROACH to Build and Maintin A Finan a CIAL SYSTEM that HouseHolds and Businessrs can count on day-to-day and that supports economic propity in the long-run.

Our Approach Includes A Focus On Shoring Up Strong Core Foundations of the Financial System, Including Safe and Sound FINANCIAL Inres, Financial Market Lities and Central Clearing CountParties, Protections for Investors and Consumers, and Financial Market Integrity.

We Also, However, Recognize the Necessity of Considering The Stability of the System as a WHOLE. And Markets -From Direct Linkages to Correled Trades -CAN CREATE OUTSIND EFFECTS on the Broider Financial System and on Our EconomyThen, then

This understanding is rooted in the reception history. Reforms and PURSUED New Macroprudential Policies Focused on Mitigating Systemic Risk. At home, there was who worked the dodd-Frank Act, Arguing that its regulation friend back innovation and eConomic GrowthAhmedabad Investment. I And Many OTHERS HAVED The OPPOSITE: APPROPRIATE Regulation is CR. Itical to supporting a Resilient Financial System that Serves as an Engine for Innovation and Growth.

Our View Has Been Borne Out. Critics' Warnings, for Example, that regulation woolation undermine the competitititys of u.S. Banks, did not help to pass. Reforms. GTHENED The Financial System, Including by Equipping Banks with Substantially More and Higher-Quality Capital that MadeTHEM BETTER POSITIONED to Extend Credit to HouseHolds and Businesses that Needed It During the Pandemic.

But we’e Well Aware that Financial inter -. Ions like the global dash for cash in march of 2020, revealing additional vulnerabilities including in short-term funding markets.

Finally, Our ApProach Reflects the Importance of Collaboration and Communication Across Regulators and Other AUTHORITIES. WIFT, CoordinalEd Action. Identifying Vulnerabilities Requires Sharing Insights. We Recognize this need in the waymath of the global Financial Crisis as WELL and Established theFinancial Stability Oversight Council to Information A More Holistic View of and Approach to Risks.

But the countcil was severely weakened during the prior administration. When I too, the number of council staff had ben cut to single digitsBangalore Stock Exchange. Analysis team at treasury, which monadors systemic risks, had ben eliminated.Coordination had significantly scaled back. Put Simply, we was wee with excels to Identify and Help Risks to Financial Stability. This Mean T we faced an increased likelihood that risks woulialize into negative impacts on American houseHolds and Businesses.

So, We Rebuilt Fsoc, Scaling up Staff and Increasing Opportunities for Agencies to come to share exports. FSOC's New Analytic Work for Financial Stability Risks is Also Critical, Identifying Key Vulnerabilities, Transmission Channels, and Authorities to Mitigate Risks. ONSThe countcil to take more effect action. And it increases public transparency.

Let Me now turn to how we've deployd this facus on core finds, the system as a whole, and color, s. I'll Address How We've Improved the Resilleity of the Treasury Market;Implementd An Effective and Targeted Response So that the Regional Banking Stress in 2023 DID Not derail Our Recovery; Addressed The DIVERSE RISKS POSED by the EV Olving Nonbank Section; and Tackled Cross-Cutting Risks. I'm Also Speak to Our Global Work.

A. Treasury Market

Given Where We Are, I'm Start with The Treasury Market. As this audience Knows Well, The Treasury Market Carries Out A RANGE of Critical Functions. Treasury itIES are using to finance our Government at the Lowest Cost to the TaxPayer and by the FederalReserve to Implement Monetary Policy. A Strong Treasury Market Helps Underpin The Role of the Dollar In Global Transactions. Or Investors Around the World and Serve as Collateral for A Wide Variety of Transactions. They're Also usedas a reference benchmark for global asset prices.

So, SINCE The Start of This Administration, Our Focus on Strong Core Foundations Has Led to Wide-Ranging WORK OTHER AGENCIES and the Private SECTOR to Strengthen The Treasury Market so that it remains the deepest, most liquid Market in the world.There's always more to do, we've made significant progress and documented it ear years, public, the latest report just last week.

We've Supported Transparence and Enabled The Government to Better Assess Vulnerabilities by Increasing The Availanceity and Quality of Data On Treasury Activity. For Example, Just This Year, We've Made More Information on Treasury Market TRADING ACTITY Available to the Public.We'll Soon Begin Collection Transaction-Level Data in The Non-CENTRLED BILARERAL RePO Market — Likely The Larger Market segment The One for Which the Least Information Has Been Available.

We’e helping Bolster Market Liquidity Through a New Treasury Buyback Program that Provides regula Opportunities to Sell Office CK to tarsury. Buybacks Also Streangthen Treasury ’s Cash Management — Including to Reduce Borrowing Costs Over Time.

We've Made Progress in Standardizing Risk Management Through The Secy Adoption of a New Rule to Expand Central Clearing in the Treasury Market. And we've informationd Consistent Regulator Oversight and Enhanced Investor Protection with A Rule Clarifying WHEN LIKUIDIDITY PROVIDIDIDIDIDIDIDIDERS Are Required to REGISTER AsDealers.

B. Banks

But as I laid out, Our Approach Considers Not Just Strong Core Foundations, But Also the Stability of the System as a WHOLE and the Need Fommunication and Co Ordination. Our Response to the Regional Banking Stress in 2023 Showcase How We're Making GoodOn all of the aspects.

A Year and a Half Ago Now, Silicon Valley Bank and Signature Bank EXPERIENSTS THAT Were Particularly Large and Fast By Historials. DEPOSIT GROWTH, ESPECIALLY in Uninsured Deposits, As Well As Significant Unrealized Losses on their Securitys Portfolios.Their runs we followed by deposit outFlows from Other Regional and Mid-Sized Banks that person to have simirlar weakness.

We KNew We Needed to Mitigate What was a Serious Risk of Contagion. So, We ACTED DecisVelyKanpur Wealth Management. Regulators Moved Quickly to Close the Banks. DATIONS FROM The BOARDS of the Fdic and the Fed and Consulting with the PresidentSystemic Risk Exception During that First Weekend. This Enabled Uninsured DEPOSITORS At the BANKS TO HAVE Access to their Funds On Morning so that then LD Pay their Employees and SUPPLIERS. And That Same Weekend, with my approval, the fed established the bank fundingProgram to help limit "

Our Efforts WERE Successful, Building on the Base of a Banking System Streangthened by the Reforms Follow THE GLOBAL Financial Crisis. OULD HAVE DESTABILIZED The Broider Financial System and Deraiced Our Economic Recovery. And we made the American taxpayers dignBear the Costs.

We're Well Aware, However, that We Need to Address the Core Weaknesss These Bank Stresses Revealed, and We Urge Moving Forward On Steps. We Need Greater S UPERVISORY Attention on Banks with Less Stable DEPOSITS, and We Need Regulations That Account forUnrealized Losses on Securitys. We Also NEED CHANKES SOTE BANKS Are Better Prepared for liquidity Stress, Such as Making Sure that they have diverse source ContingEnce Funding and Especially that they have the capacity to borrow at the discount Window and Periodically Test This Capacity.This Includes Considering Establish CollationIn Requirements to FACILITEATE BORROWING THE DISCOUNT WINDOW WISCONT WINDOW s Operational Capacity, and Enhancing Coordination BetWeen The Discount Window and the Federal Home Loan Banks. And we Also needed regulators' gthen Long-TERM Debt Requirements for Regional Banks so that they can be more effectively resolution if they do fail.

C. Nonbanks

OUR UNDERSTANDINGING of the Need for a Holistic Approach Has ALSO DRIKEN Work On Nonbanks, Which Have Become An Increasingly Important Part of the U.S. Financial System OV Er the Past Few Decades. Credit Provided by U.SLucknow Wealth Management. Nonbank IntermediaRies Has Been Growing More Quickly Than Bank Credit and Now NowExceeeds On-Balance Sheet Bank Credit. This Makes Nonbanks An Essential Source of Financing, with Differents of the Sector Supporting Diverse Activities, F ROM TRADING to Retail. And this also met to focus on their vulnerabilities.

Making Sure Fsoc has the tools it neededs ben at the heart of our work. Last November, The Countcil Took a Key Step FORWARD BY ISSUING PODANCED SHES A Transparent and Durable PROCESS for How the Countcil Ueses Authority to Designate A Nonbank FinancialCompany for Fed Supervision and Prudential Standards. This Streangthens the Countcily's Ability to Promote A Resilient Financial System.

But Designation Remains only one of fsoc ’s statutory authorities, and the nonbank sector is heterogeneous and diverse, so we’ve alsoed much broader work.

We've Made Progress Addressing Investment Funds with Features that Create Financial Vulnerabilities, Such As Through the Secretity Requirements For Money Market Mutual Funds to Reduce Run Risk. FSOC MEMBER AGENCIES CONTINUE WORKING to Support Better Data Collection and Monitoring to Identify Risks FROM HIGHLYLeveraged Hedge FFDS and the Growth in Private Credit. In Other Areas, LIKE Open-End Funds, The Sec and Industry Shouldry Potential Options TO A DDRESS Remaining Vulnerabilities.

We've Also Focused on the Increase in Market Share of Nonbank Mortgage Servicers, Which Perform Critical Functions Like Collection Payments. Nilytic framework, issue a report finding that stress in this sector calling harm mortgages and disrupt eConomic activity.ITS Recomgertions Include Encouraging State Regulators to Streangthen Prudential Standards And Require Resolution and RECOVERY PLANNING and Calling For Action to Establish A Fund to Facilities Continuity of Service Operations in the event of Stress WHILE Avoiding TaxPayer-Funded Bailouts.

We've Also Identify New Vulnerabilities Related to NEWER ENTRANTS LIKECHS and Technology Changes, Including Vulnerabilities Presented by the Si Gnificant Growth of Digital Assets and Trading Platforms. Our Work Included Issuing A Report on Digital Assets and One on StableCoses, Both of Which Assessed risksAnd Called for Congress to Legislate to Close Regulatory Gaps While Supporting Innovation.

D. Cross-Cutting Risks

And the Across Banks and Nonbanks, we have also ben focused on what I ’ll refer to today as cross-cutting risks, including this related to corbersecance, IAL Intelligence, and Climate.

To Combat Cyber ​​Risks, We've Helped Lead A Multi-Year Effort in Collaboration with the Private Security SECTORSTER THE SAFE SAFECTIVE Use of Cloud Services. We WOR Ked with Banks to Launch A CybeRSECURITY Alliance Called Project FortressThroud WHICH WICES With the Financial Institutions of Different Sizes to Deploy Defensive Meansure a TOOLTAT Scans For Vulnerabilities AND Ive Measures Like Sanctions to Hold Perpetrators of Cyber-Related Activities Accountable.Cyber ​​Threat Actors, So We've Responded by PROVIDING A PlayBook for Financial Institutes on Best Practices for Managing AI-Specific Cyber ​​Risks.

More Broadly, We Also that ai Technologies Bring Significant Potential for EFFICIENCY and Other Benefits But Also Potential Risks. We are working to monitor PTION, Identify Vulnerabilities, and Assess WHETHER Existing Regulations Are SUFFICIENT to Mitigate Them or New One Are Needed.

We've Focused on Climate-Related Risks to Financial Stability as Well. D Fast-Evolving Risk-Assessment Methodologies. The Office of Financial Research Launchd A Cutting-Edge PlatformThat PROVIDES Regulators Access to Climate and Financial Data to Support More Research and Analysis. And We're Currently Colleing with State Insurance s to collect data on the count and availability of homeowners insury at the zip-code level to help us better under the risksTo the Financial System from Increasingly Severe and Frequent Climate-Related Disasters.

E. Global Work

Addressing cyber, AI Technologies, Climate and Many Other Risks Also Reques Applying Another Aspect of Our Approach: Coordination and Collaboration, INCLUDING A Cross jurisDictions.

RISKS DONTEECT National Borders. The Larget Financial Firms Operate in Many Countries, and Cross-Border Investor Flows Are Sizable. And Communicate Regularly with Our Countparts in Other Countries, and to Engage Through Multilatoral Groups, LikeThe G7, G20, and Financial Stability Board. We get a powerful reminder of the image of strong intermingal coordination, and especially the need for a well-functs Ioning International Framework for Recovery and Resolution, Just Last Year with the Failure of Credit Suisse.

So, We've Made It A Key Priority to work closly with the OTHER JURISDICTIONS BeFore, During, And after Times of Financial Stress. We've StreangThened Communication with h counterParts in Other JurisDictions, Such as the eu, UK, Andia, to UnderstandEach Other's Policies, Clarify Our Intents and Expectations, and Respond to Crises.

And Financial Stability Has Also Been A Key Focus of Our Efforts To Build A Healthy Economic Relationship with China. CHED and Co-Chairs with The People's Bank of China is now Enabling Regular and Durable Communication. And Last Month,WE Exchanged Letrs with The Pboc that Streangthen Information Sharing and Will Make It Easier to Coordinal in Times of Financial Stress.

I ’ll end here today, having I hope given some indication of the breadth and depth of our data.

Work to build and maintain a Resilient Financial System is never over. Hey Often Entail having avoided counterFactuals. But that does not make them less significant.

We SAW Less than Two Decades AGO How A Financial Crisis Can Turn the Lives of Americans Upside double. ENT Thateps ites eye on the Ball Can Protect American Business and HouseHolds FROM Financialcontagion and its impacts.

I COULD Not Believe More Strongly that we must keep at it. A Resilient Financial System is Critical to a Strong Economy. And Streangthening It Requires Insisting On HTFUL Regulation, Including in the Face of Challenges from Those Who Advocate to Roll Back Policies and Regulations.

It has ben an Honor to Contribute to this ever-changing, Ever-Important Project Throughout My Career and Over the Past Three and Half Yearsury Secretary. roud of where we are today, everything as we remain committed to the work aheadThen, then

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