Treasury Secretary Yellen says she wouldn't be surprised to see more bank consolidation

KEY POINTS

• It's likely for some smaller banks to consolidate, Treasury Secretary Janet Yellen said Wednesday morning
• Yellen also said she expects there to "be issues" in the commercial real estate sector given the changing approach to work.

WASHINGTON — Given the overall environment in the industry, it's likely for some smaller banks to consolidate, Treasury Secretary Janet Yellen said Wednesday morning.

"There is motivation to see some consolidation and it wouldn't surprise me to see some of that going forward," Yellen said in an interview on CNBC's "Squawk Box."

Yellen said she wouldn't want to see the diverse banking system threatened by further consolidation, but it would be understandable given the pressure on earnings some banks are experiencing.

Janet Yellen, US Treasury secretary, speaks during the Independent Community Bankers Of America (ICBA) Capital Summit in Washington, DC, US, on Tuesday, May 16, 2023. 

Nathan Howard | Bloomberg | Getty Images

The Treasury secretary also said she expects there to "be issues" in the commercial real estate sector given the changing approach to work.

"We've seen such a big change in attitudes and behaviors toward remote work," Yellen said. "And especially in an environment of higher interest rates. I think banks are broadly preparing for some restructuring and difficulties going ahead."

Yellen added that stress tests of the largest banks showed they have enough funds to handle any upsets.

"My overall read is that the level of capital and liquidity in the banking system is strong and while there will be some pain associated with this, the banks should be able to handle the strain."