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.

Yellen said that a 2018 roll-back of bank capital requirements and stronger supervision for smaller and mid-size banks with assets below US$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.”

She said that regulatory reforms put in place after the 2008 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 repeated comments last week that the Treasury, Federal Reserve and FDIC were prepared to again use the same tools they used to protect depositors in the SVB and Signature failures.

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