Yellen warns of financial system risk if debt ceiling is not raised

NEW YORK: Treasury Secretary Janet Yellen told US financial regulators that if Congress fails to address the nation’s debt ceiling, there may be “financial stability implications.”

The fallout from not raising the limit in a “timely manner” was among topics raised at a private meeting of the Financial Stability Oversight Council, the Treasury Department said in a statement. Yellen has campaigned for congressional action and has warned that the Treasury would probably reach the borrowing limit next month.

The council of regulators, including the chiefs of the Federal

Reserve, Securities and Exchange Commission and the Office of the Comptroller of the Currency, is responsible for heading off risks that could spark another financial crisis. The group also discussed the commercial real estate market and heard a presentation from the Federal Reserve Bank of New York on industry trends and “the exposures of various financial sectors to commercial real estate and potential risks.”

Under orders from President Joe Biden, the council is also working on a report assessing how climate change could shake the financial system, which is due in November.

Yellen also underscored the importance of finalizing and swiftly implementing new international tax rules agreed by 134 countries, and said the US Congress was making progress on strengthening US international tax rules, her office said.

Yellen told her counterparts from the Group of Seven advanced economies that the Biden administration was seeking to achieve a US minimum tax rate on foreign earnings of at least 21% on a per-country basis.

She also emphasized the need for continued G7 efforts to enhance support for low-income countries hit hard by the pandemic, and urged major economies to lend their newly allocated Special Drawing Rights from the IMF to further support vulnerable countries.