Yellen: More Bank Consolidation ‘Wouldn’t Surprise Me’

On Wednesday’s broadcast of CNBC’s “Squawk Box,” Treasury Secretary Janet Yellen stated that some banks are seeing earnings pressure and this provides incentive for bank consolidation, “and it wouldn’t surprise me to see some of that going forward.”

Yellen said, “I do think that there will be issues with respect to commercial real estate. Certainly, the demand for office space since we’ve seen such a big change in attitudes and behavior toward remote work, that has changed, and especially in an environment of higher interest rates, I think banks are broadly preparing for some restructuring and difficulties going ahead. But I think, certainly, stress tests of the largest banks show that they have adequate capital to deal with it, and I know the supervisors will be looking closely at a wide range of banks to make sure that they’re adequately prepared to deal with it. But my overall read is that the level of capital and liquidity in the banking system is strong, and that, while there will be some pain associated with this, that banks should be able to handle the strain.”

She added, “I see strength in a banking system that has a diverse set of financial institutions capable of satisfying different needs across our economy, and we do have a diverse banking system with strong community banks, regional banks, larger banks that are involved in global business, and I wouldn’t want to see that threatened. But, certainly, in this environment, some banks are experiencing pressure on earnings and there is a motivation to see some consolidation, and it wouldn’t surprise me to see some of that going forward.”

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