26 August, 2017
The Federal Reserve chair said in a speech at Jackson Hole, Wyoming, that the reforms have made the system "substantially safer" and are not weighing on growth or lending.
U.S. stocks have been choppy this week amid caution ahead of Jackson Hole and uncertainty over the direction of Washington policy under President Donald Trump.
US stocks got off to a strong start after President Donald Trump's chief economic adviser Gary Cohn said the White House would turn its attention to the long-awaited tax reform agenda next week. Yellen's four-year term ends in February, and President Trump has said he is considering a replacement.
Yellen's forceful support for financial regulation may complicate her prospects for renomination as Fed chair.
"The Fed chair's speech was mum on monetary policy, which hurt the dollar by keeping uncertainty high about whether the central bank would boost interest rates again this year", said Joe Manimbo, senior market analyst at Western Union Business Solutions.
While Yellen did not dwell heavily on monetary policy during her speech at the Jackson Hole conference, she did offer a defence of post-financial crisis bank regulations.
Some saw Yellen's forceful defense Friday of the regulatory structure imposed on banks since the 2008 crisis as further lessening the likelihood that Trump will reappoint her.
Cohn, who is Jewish, told the Financial Times in an interview that he was disturbed by the events in Charlottesville and disappointed with the response of the president, who appeared to equate neo-Nazis and white supremacists with counterprotesters.
Yellen also warned that policymakers should not ignore the lessons from the recent financial crisis in 2008 that hit the USA economy and households hard, as "we can never be sure that new crises will not occur". The ECB is expected to take up the issue next month.
Yellen said large banks have shifted to a more stable mix of financing. Memories of the last crisis "may be fading", she warned.
The Federal Reserve is looking at changes to ease regulations for smaller banks, she said. She also suggested that the so-called Volcker Rule, which limits the ability of banks to trade their own investments, might need to be modified. "The bond market is rallying with at least some people thinking (Yellen) would make the case for more rate hikes to take some steam out of the stock market", said Chris Low, chief economist at FTN Financial in NY.
She added: "A resilient financial system is critical to a dynamic global economy".
Trump has already nominated a new Fed vice-chair of financial supervision, Randal Quarles, who has signalled an appetite to lessen the burden of regulation.