WASHINGTON: US Treasury Secretary Janet Yellen said on Thursday that banking regulation and supervisory rules need to be re-examined in the wake of the Silicon Valley Bank and Signature Bank failures to ensure current banking system risks are addressed.

In remarks prepared for delivery to the National Association for Business Economics, Yellen also called for stronger regulation of the growing non-bank, or “shadow bank”, sector, including money market funds, hedge funds and crypto assets.

Yellen said a 2018 roll-back of bank capital requirements and stronger supervision for smaller and mid-size banks with assets below $250 billion should be re-examined.

“Any time a bank fails, it is cause for serious concern. Regulatory requirements have been loosened in recent years. I believe it is appropriate to assess the impact of these deregulatory decisions and take any necessary actions in response,” Yellen said.

She added that regulatory reforms put in place after the 2008 financial crisis have helped the US financial system weather shocks, including the COVID-19 pandemic.

“But the failures of two regional banks this month demonstrate that our business is unfinished,” Yellen said. adding that the financial system was significantly stronger than it was 15 years ago.

“This is perhaps best illustrated by the fact that we’ve seen relative stability in the overall banking sector this month, even as concerns grew about specific institutions,” she said.

But Yellen said it was important that US regulatory authorities examine whether the current supervisory and regulatory regimes “are adequate for the risks that banks face today. We must act to address these risks if necessary.” Yellen’s remarks contained no specific proposals and she acknowledged that tighter regulation imposes costs and care should be taken to ensure the health and competitiveness of community and regional banks. But she added that such costs “pale in comparison to the tragic costs of financial crises.” Yellen repeated comments last week that the Treasury, Federal Reserve and Federal Deposit Insurance Corporation were prepared to again use the same tools they used to protect depositors in the SVB and Signature Bank failures.

“And we would be prepared to take additional actions if warranted,” she added, without specifying steps that could be taken.