NEW YORK — Treasury Secretary Janet Yellen said Tuesday that banks have a critical role to play in a new agency initiative focused on improving financial inclusion and closing the wealth gap.

Speaking at the annual American Bankers Association Convention in New York, Yellen unveiled the Treasury’s National Strategy for Financial Inclusion. The plan—which was shaped through a yearlong collaborative process involving ABA staff, government agencies, and consumer advocates—aims to expand access to the financial system for low-income households, people of color, and rural populations, as well as improving consumer outcomes.

“Access to financial products and services is critical to creating opportunity for all Americans,” she noted in a companion edition. “For the first time, the Treasury strategy provides a national roadmap for expanding access to fundamental financial tools, such as credit and investment, which are key to building wealth. Implementing these recommendations will help more families build financial security and thrive.”

Yellen said the agency would seek “active industry partnership to advance this strategy.”

The national strategy focuses on five core objectives designed to provide access to products that promote financial well-being and security. The objectives are:

• Promote access to transaction accounts that meet consumer needs.
• Increase access to safe and affordable credit.
• Expand equitable access to savings and investment.
• Improving the inclusiveness of financial products and services provided or supported by the government.
• It fosters confidence in the financial system by protecting consumers from illegal and predatory practices.

Yellen said the cooperation of financial institutions is needed to offer tailored transaction accounts to underserved communities, which would reduce the number of unbanked households in the United States. According to a 2021 survey by the Federal Deposit Insurance Corp., nearly 5.9 million — about 4.5 percent — of American households had no checking or savings accounts. While this is the lowest rate on record since 2009, the study found that unbanked rates were disproportionately higher among lower-income, less-educated, black, Hispanic, disabled and single-mother households.
“It’s clear that banks of all sizes have been crucial partners in advancing many top economic priorities,” she said. “So let me thank you all for this powerful and important collaboration and emphasize that it must continue.”

Regulatory Lessons

Reflecting on what regulators have learned in 2023, Yellen said Treasury and federal officials will work closely with banks to address lingering vulnerabilities in the system. She highlighted the Treasury’s continued focus on issues that contributed to the banking crisis – including the confidence of some firms. uninsured deposits and the effects interest rate risk on the securities portfolios of the banks.

“This means making sure banks are prepared for liquidity stress,” she said. “Including ensuring that banks have various sources of funding for contingencies and the ability to borrow at the discount window and periodically test that ability.”

Yellen also acknowledged the expanding role of non-banks in finance and the unique challenges they present to traditional banks. She said the agency would continue to monitor and address risks posed by the non-banking sector, including private credit and fintech, and its interconnections with the banking sector.