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Yellen Cites Commitment to Small-FI Regulatory Relief
Wednesday, June 22, 2016 6:40 AM

Federal Reserve Chair Janet Yellen, who cited cautious optimism about the economy, told the Senate Banking Committee Tuesday that the Fed supports relieving the regulatory burdens of small financial institutions.

Yellen was answering a question from Sen. Jon Tester (D-Mont.), who asked if she thought the consolidation of community banks was a result of increased regulations for financial institutions. She said it is likely due to a handful of factors, but she added the Fed is committed to relieving the regulatory burden for smaller institutions.

She will testify again today before the House Financial Services Committee on the U.S. economy as she delivers the Fed’s semiannual report.

Yellen gave no firm projections on the next interest-rate increase during Tuesday’s hearing. Last week, the Federal Open Market Committee left the federal funds target rate at a range of 0.25 to 0.5 percent.

The Fed chair acknowledged slow productivity growth and weak business investment, but she said she doesn’t see a recession happening in the coming year. She also addressed senators’ questions regarding this week’s UK vote to exit the European Union. She said a vote to exit “could have significant economic repercussions” that could usher in a period of uncertainty and financial market volatility.

Sen. Mark Warner (D-Va.) brought up the cyber breaches resulting from a malware attack on the Society for Worldwide Interbank Financial Telecommunications (SWIFT), an international messaging system used by 11,000 financial institutions. He said the Fed’s cybersecurity capability is critical to the health of the financial sector, and Yellen agreed.

On Monday, Reuters reported that the Fed Board’s Office of Inspector General is expected to release a report in the fourth quarter on how well the central bank is overseeing cybersecurity practices at financial institutions.

The FOMC meets again July 26-27.