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Yellen says any changes to financial rules should be 'modest'

Janet Yellen, chair of the U.S. Federal Reserve, arrives for a dinner during the Jackson Hole economic symposium, sponsored by the Federal Reserve Bank of Kansas City, in Moran, Wyoming, U.S., on Thursday, Aug. 24, 2017. Two Federal Reserve officials took opposite sides of the central bank's ongoing debate over how to respond to disappointingly low inflation figures, as policy makers gathered for their annual symposium in Jackson Hole, Wyoming. PHOTO:BLOOMBERG

[WASHINGTON] Federal Reserve Chair Janet Yellen said any rollback of post-crisis financial reforms should be "modest" because they've made the banking system stronger and more resilient without unduly diminishing the supply of credit to the economy.

Ms Yellen, speaking in Jackson Hole, Wyoming, on Friday, issued her broadest defense so far of the government's response to the 2008 financial-market meltdown while outlining some areas that regulators could review to improve efficiency in the financial system.

"Any adjustments to the regulatory framework should be modest and preserve the increase in resilience at large dealers and banks associated with the reforms put in place in recent years," Ms Yellen said, in what could be her final speech as Fed chair at the annual gathering of central bankers. Her term expires in February.

She said some aspects of the Volcker Rule, which limits proprietary trading by banks, may be simplified while the Fed is taking steps to reduce "unnecessary complexity" in regulations affecting small banks. More broadly, however, Ms Yellen said the reforms have made the financial system stronger and safer.

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"The balance of research suggests that the core reforms we have put in place have substantially boosted resilience without unduly limiting credit availability or economic growth," she said.

Ms Yellen's remarks could put her at odds with the Trump administration, which issued a Treasury Department report in June that called for "significant changes" to the Volcker Rule.

President Donald Trump has made deregulation a pivotal part of his agenda for the financial industry, with the president and his advisers repeatedly blaming the Dodd-Frank Act for stifling lending and economic growth.