U.S. Federal Reserve Chair Janet Yellen said the financial system is safer today than it was in 2008 and should be able to avoid another financial crisis for many years to come.
Yellen made the remarks Tuesday, June 27, while speaking at the British Academy in London.
The system is much “safer and sounder,” thanks in part to efforts to detect emerging risks by looking to the “corners of the financial system that are not subject to regulation,” she said.
Yellen would not go so far as to suggest there would not be another financial crisis, but she said she hoped it would not happen in “in our lifetimes.”
Yellen turns 71 in August.
Yellen also spoke of the importance of continuing to regulate financial markets and banks in the manner put in place since the banking crisis, warning that “memories do tend to fade.”
“I hope that that won’t be the case and I hope those of us who live through it will remind the public that it’s very important to have a safer, sounder financial system, and it is essential to sustainable growth,” she said.
That said, Yellen acknowledged that the Fed had to be mindful of the regulatory burden imposed on smaller banks and community banks that are not systemic to the financial system.
But reducing the regulatory burden could not compromise stress testing and capital liquidity requirements “that have done a lot to make the system safer,” she said.
Yellen’s comments come just weeks after the Fed announced U.S. household debt had reached levels not seen since the financial crisis struck in 2008.
A rise in student and auto loans has raised new fears that the economy will be lag as consumers struggle to repay debts, threatening the kind of defaults seen a decade ago.
Student loans have the highest delinquency rate of any loan type tracked by the New York Fed’s quarterly household debt report. About 1 in 10 student borrowers is behind on repaying their loans.