Federal Reserve Chair Janet Yellen said she would be open to a “modest increase” in the asset level for subjecting banks to tighter oversight, calling the $50 billion threshold an unnecessary burden on smaller lenders, Bloomberg News reported today. Responding to questions at a Senate Banking Committee hearing yesterday, Yellen acknowledged that banks just above the level set by the Dodd-Frank Act are already facing costly demands such as requirements to undergo stress tests and write plans for how they could go through bankruptcy in a failure. “For some of those institutions, it does look from our experience, that the costs exceed the benefits,” Yellen told lawmakers. If the bar were raised, she said, the Fed should retain power to designate smaller banks based on risk. Senator Richard Shelby (R-Ala.), who leads the Banking Committee, has introduced legislation that would raise the bar for systemic designation to as high as $500 billion in assets. Democrats including Sen. Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts have led opposition to the Shelby bill, saying that it would exempt banks that could threaten the financial system and lead to taxpayer bailouts.
