Yellen: Liquidity Played Important Role in Bank Failures

The transcript discusses the need to strengthen banking rules to prevent future bank failures. Secretary Yellen emphasizes the importance of analyzing past failures and reexamining current regulations. Stress tests are highlighted as crucial tools for identifying vulnerabilities in banks and improving risk management. Yellen supports the continued use of stress tests, noting their role in enhancing supervision since the financial crisis. However, she points out that while stress tests focus on capital, liquidity also plays a significant role in bank failures.

In what ways can regulators act when they identify problems in banks early?

What is the limitation of supervisory stress tests mentioned by Secretary Yellen?