Remarks by Secretary of the Treasury Janet L. Yellen at the American Bankers Association Annual Convention

As Prepared for Delivery

Let me start by thanking President Nichols for the invitation and for his leadership. I am very glad to have the opportunity to speak to all of you today.

Over the past four years, we have forged a strong partnership to get American households and businesses the capital they need, expand economic opportunity, and support the resilience of our financial system. I'd like to speak about this collective work today, and there is no better place to start than to step back to reflect on our economic trajectory since the start of this Administration.

When President Biden and Vice President Harris took office, thousands of Americans were dying each day from COVID-19. The unemployment rate was 50 percent higher than it is now. Today, by contrast, the U.S. economy is strong. We've seen robust economic growth, bolstered by solid consumer spending and business investment, even while inflation has come down significantly from its peak. The U.S. labor market remains healthy, with the unemployment rate near historic lows and the prime-age labor-force participation rate near all-time highs. While there is more to do to bring down the cost of living, wages have risen faster than prices, which means that the typical American can afford more goods and services than before the pandemic. And Americans are starting new businesses at a record rate, reflecting optimism about the economy.

We haven't gotten to where we are by chance. From our first day in office, the Biden-Harris Administration acted quickly and decisively to drive a historic economic recovery and put our economy and financial system on stronger footing for the long-term.

We also didn't get here alone. The banking sector has been critical. From the start, we recognized the value of a broad and diverse banking system, from small community banks to the largest players, with strong capital and liquidity. And in recent years, banks navigated the pandemic and made it through the regional banking stress, continuing to serve as a backbone for Americans' financial health and our country's economic growth. Community banks in particular have played a key role, including by providing a significant portion of small-business loans relative to their assets.

I. Economic Recovery

Let me discuss several key areas of our partnership, starting with our historic economic recovery. The recovery depended on getting money out the door to families and businesses as quickly and responsibly as possible. This meant working with the banking system, such as to deliver the American Rescue Plan's Economic Impact Payments to millions of families.

This was far from business as usual. Treasury conducted outreach to encourage opening free and low-cost transaction accounts to receive these payments. And banks took action to support their customers at that extremely difficult time, with many community banks, for example, reducing or eliminating penalties for late payments on loans or credit card bills.

We also depended on banks for other recovery programs, such as the State Small Business Credit Initiative, a landmark small business program housed at Treasury. Community banks are behind around 90 percent of the SSBCI loans that are supported by banks. We see their impact in examples like Spencer Manufacturing, a family-owned business in Michigan that expanded its manufacturing thanks to SSBCI support and an over $4 million loan from a Michigan-based community bank. As we marked on the CDFI Fund's 30th anniversary last month, our Administration has also provided unprecedented support to community development financial institutions to help communities recover and invest for the long-term.

II. Strong and Inclusive Growth

And we've continued to work with banks as we've looked to drive strong and inclusive growth. Treasury has announced millions in new SSBCI awards. And we're partnering with CDFIs as we address challenges that have been mounting for decades, such as the drastic shortage of housing units. The CDFI Fund helped finance more than 100,000 affordable housing units last year, and we've worked to expand its impact, such as by launching a new program that will provide an additional $100 million over the next three years to support the financing of affordable housing.

As part of our focus on driving strong and inclusive growth, we're also working closely with financial institutions to accelerate the transition to a lower-carbon economy. Treasury's Principles for Net-Zero Financing and Investment support financial institutions that make net-zero commitments in taking consistent and credible approaches. And financial institutions are key partners to taxpayers seeking to take advantage of the Inflation Reduction Act, including through the transferability market. I strongly believe that banks must stay the course in realizing the opportunities of the transition and in more broadly considering impacts to business from climate change.

And as we look to the long-term, we also see banks of all sizes as key to our efforts to expand financial inclusion. For example, Treasury has supported the efforts of the Economic Opportunity Coalition, a public-private partnership announced by Vice President Harris with bipartisan backing. The EOC's members, including several of America's largest banks, have committed over $1 billion to community lenders to reach underserved communities across the country.

And many of you in this room have been involved in other important efforts. Take the example of Reading Cooperative Bank in Massachusetts, led by former ABA Chair Julie Thurlow. Under Julie's leadership, its extensive work to advance financial inclusion has included opening a new branch staffed with bilingual bankers in an immigrant community, providing loans to finance housing redevelopment, and pioneering innovative financial products that meet customer needs. In Wisconsin, Bay Bank, a minority depository institution, is serving its community by providing financial education to Tribal citizens and helping them build credit.

To move this work forward, I am proud to announce today the launch of our National Strategy for Financial Inclusion in the United States. It provides a roadmap for the public, private, and non-profit sectors to promote the ability of all communities to fully participate in our robust economy and financial system.

The strategy benefited from a yearlong process to gather input, including sustained engagement with ABA staff and members, other government agencies, consumer advocates, and many others. And it importantly focuses not just on increasing access to the financial system but also on leveraging that access to drive better consumer outcomes like increased financial resilience, wellbeing, and wealth.

It emphasizes the need for action to expand access to transaction accounts and to safe and affordable credit; increase retirement and emergency savings opportunities; improve government financial services; and strengthen consumer protections. Access to safe, affordable financial products and unbiased information can help all Americans pursue financial security. And banks have roles to play across these activities, from facilitating payments to offering credit. We will continue to seek your active partnership in moving this strategy forward.

III. Financial Stability

And as we've driven a historic economic recovery and pursued strong and inclusive long-term growth, we've also focused on working with banks to maintain and strengthen financial stability.

In March of 2023, we acted decisively in response to runs at Silicon Valley Bank and Signature Bank that were particularly large and fast by historical standards. After regulators closed the banks, we worked quickly to enable all depositors to access their funds. I also approved the Federal Reserve's establishment of the Bank Term Funding Program. Helped by the base of a banking system strengthened by post-financial crisis reforms, we prevented contagion that could have destabilized the broader financial system and derailed our economic recovery.

As we look ahead, we will continue to work with you to address the vulnerabilities the banking stresses in 2023 revealed, including increased shares of uninsured and concentrated deposits and unrealized losses on loan and securities portfolios. This means ensuring that banks are prepared for liquidity stress, including making sure banks have diverse sources of contingency funding, and the capacity to borrow at the discount window and periodically test this capacity.

We will also continue to work with you to address a wide range of other risks and opportunities. The ABA has been a key partner in our multi-year effort to bolster the safe and effective use of cloud services, producing resources to support financial institutions in contracting with cloud service providers. We also launched Project Fortress, through which we're working with financial institutions of all different sizes to pursue offensive measures, like sanctions that hold perpetrators of cyber-related activities accountable, and defensive measures like scanning for vulnerabilities. More than 1,000 financial institutions have now joined. And ABA members also provided important perspectives in response to our recent request for information as we've worked to monitor adoption and identify opportunities and vulnerabilities related to the use of AI technologies.

And climate-related financial risks also need to be identified and managed. Rising homeowners insurance premiums and gaps in coverage, for example, could increase risks to lenders. So we'll be considering the risks to banks as well as households as we assess the impacts of climate change on homeowners insurance and monitor other climate-related risks to financial stability.

We also of course recognize the growing and evolving role of nonbanks in the financial sector, and challenges for banks as they both cooperate and compete with those firms. We will continue to monitor and address risks posed by the nonbank sector, including private credit and fintech, and its interconnections with banks.

IV. Illicit Finance and Sanctions

And finally, Treasury's work to protect the U.S. financial system by cracking down on illicit finance depends on financial institutions. Treasury issued new regulations to help safeguard the residential real estate and investment adviser sectors from illicit finance. We've appreciated your engagement and feedback, including on our latest program rule to strengthen our anti-money laundering and countering the financing of terrorism work, which we are working to finalize. We also depend on financial institutions for suspicious activity reports that have enabled U.S. authorities to achieve successful prosecutions and seize billions of dollars involved in illicit finance. That's why we've recently been convening financial institutions and law enforcement officials in key regions to exchange information that will help us crack down on the illicit financing that fuels the opioid epidemic.

Domestic and international financial institutions are our front-line defense in other contexts as well, such as in enforcing our sanctions. Nowhere is this truer than with our Russia sanctions, where many banks have been key partners in disrupting transactions that help Russia get financing and goods to sustain its illegal war.

v. Conclusion

As we step back and reflect on the past four years, it's clear that banks of all sizes have been crucial partners in moving forward many of our top economic priorities. So let me thank all of you for this strong and important collaboration and emphasize that it must continue. Thank you.

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