Yellen in Frankfurt: Bankers & MBA Students

Treasury Secretary Janet Yellen convened with German bankers on Tuesday. The roundtable discussion focused on global macroeconomic trends, the risks to financial security, and the impact of multilateral sanctions against Russia.

She asked bankers to be more proactive in their adherence to sanctions restrictions, and to impress the same upon their affiliates and correspondents.

“We must remain ambitious in our efforts to combat sanctions evasion,” Yellen emphasized. “It is critical to prevent Russia from acquiring sensitive battlefield goods that could further its brutal, unjust, and illegal war.”

The dialogue covered a broad spectrum of topics, from developments in commercial real estate and business banking to the intricacies of U.S. and European trade relations with China. Particular attention was given to the German financial sector’s role in enforcing sanctions against Russia, with Yellen highlighting the United States’ priorities in mitigating risks to financial stability.

Secondary Sanctions

The Secretary underscored the essential role financial institutions play in disrupting Russia’s capacity to wage war, stressing the need for ongoing vigilance and industry collaboration.

"As I am sure you know, last December, President Biden authorized secondary sanctions against foreign financial institutions if they conduct or facilitate any significant transaction or provide any service involving Russia’s military-industrial base. This strengthens the United States’ ability to disrupt and degrade Russia’s war machine.

"In response, many financial institutions have bolstered their compliance measures in line with OFAC guidance.

"We are seeing the positive impacts of these efforts: The global financial sector, including German banks, is helping to frustrate Russia’s ability to procure goods for the battlefield and its defense industrial base. Thank you for the efforts you have already made.

'However, our objectives have only been partially met. Russia continues to procure sensitive goods and to expand its ability to domestically manufacture these goods. We must remain vigilant and be more ambitious.

'I urge all institutions here to take heightened compliance measures and to increase your focus on Russian evasion attempts. I ask that you ensure that that your global sanctions compliance policies are stringently applied by your branches and subsidiaries abroad. I also recommend that you reach out to your foreign correspondent banking customers in high-risk jurisdictions to encourage them to do the same."

Yellen was joined by executives from major financial institutions, including Commerzbank, Deutsche Bank, Deutsche Börse, DZ Bank, KfW, Goldman Sachs, and J.P. Morgan, who offered insights and perspectives on the evolving financial landscape.

University Speech

In remarks to the Frankfurt School of Finance and Management the day prior, Yellen defended the Boden Administrations efforts to rebuild the transatlantic alliance.

"Put simply, the transatlantic alliance has delivered for Americans, Europeans, and many others. And the United States has been committed to advancing it—through multilateralism, most notably through the G7, NATO, and U.S. relations with the EU—and through bilateral relationships between the U.S. and European countries, including, of course, with Germany.

• Because of our careful and joint work, the price cap worked. Russia’s oil tax revenue was nearly 30 percent lower in 2023 than in 2022. 
• Investment screening is another area where close collaboration between the U.S. and European countries has driven crucial developments. 
• "It’s also critical that we ensure Ukraine has the support it needs to equip its military, fund critical services, and ultimately rebuild in the medium- to long-term. That’s why I believe it’s vital and urgent that we collectively find a way forward to unlock the value of Russian sovereign assets immobilized in our jurisdictions for the benefit of Ukraine.
• "With regard to investment security, the U.S. is moving forward with implementing a program addressing the risks related to U.S. outbound investment in sensitive technologies. But these risks are not unique to us, and we encourage our partners and allies, including European countries, to do the same.

China

"As I’ve repeatedly emphasized, we do not seek to decouple; we seek to diversify. President von der Leyen has said the same, emphasizing the need to de-risk...

And industrial overcapacity not only poses a threat to firms in the U.S. and Europe. It could also prevent countries around the world, including emerging markets, from building the industries that could power their growth.