Yellen concerned about commercial real estate sector

U.S. Treasury Secretary Janet Yellen said she has concerns about the commercial real estate sector due to high interest rates and changing working models after the pandemic and that banking regulators are focusing on this issue. U.S. Treasury Secretary Janet Yellen attended a hearing in the Financial Services Committee of the U.S. House of Representatives on the annual report of the Financial Stability Oversight Council. Stating that she has concerns about commercial real estate, Yellen said that banking regulators are focusing on this issue. Yellen stated that regulators are working to ensure that loan loss reserves are established to cover losses, that dividend policies are appropriate and that liquidity is sufficient, and that the refinancing of commercial real estate loans that have matured due to high interest rates and changing working models after the pandemic and the emptying of offices will create great stress on the owners of these properties. U.S. Treasury Secretary Yellen said, “I am concerned. Although there are some institutions that are quite stressed due to this issue, I believe this is manageable.” “Congress should pass legislation that will regulate stablecoins” Emphasizing that the economic power of the US depends on a strong and resilient financial system, Yellen stated that the Financial Stability Oversight Council will be monitoring various risks throughout 2023, including risks arising from the commercial and residential real estate sector, global geopolitical conflicts, and technological developments. Referring to the risks the council focuses on, Yellen noted that the first of these is the risks arising from the banking sector and non-bank financial institutions. Yellen stated that due to the increasing severity and frequency of climate-related events, they are trying to increase coordination with assessment efforts regarding financial stability risks related to this. Drawing attention to the fact that they also focus on digital assets and related risks, such as transactions on crypto asset platforms and stablecoins, vulnerabilities arising from crypto asset price fluctuations, and the proliferation of platforms that violate or operate outside of applicable laws and regulations, Yellen said, “Applicable rules and regulations should be implemented, and Congress should adopt legislation that will regulate the spot market for stablecoins and non-securities crypto assets.” Call on financial institutions to deepen expertise in AI Noting that they are also focused on strengthening protections against cybersecurity risks, Yellen expressed support for the sharing of timely and applicable cybersecurity information, including ongoing partnerships between state and federal agencies and the private sector. “The Council is closely monitoring the increasing use of AI in financial services, which provides potential benefits such as reducing costs and increasing efficiency, as well as potential risks such as cyber and model risk,” Yellen said. US Treasury Secretary Yellen emphasized that financial institutions, regulators, and market participants should continue to deepen their expertise and monitoring capacities in the field of AI.