Yellen told CNBC in a live interview that some of the selling of bank shares was due to earnings strain, but added that the "bar is pretty high" for imposing any controls on short selling of bank stocks.
"We're not seeing substantial deposit runoff," Yellen said. "So there are some pressures on stock prices but our banking system is well capitalized, it has access to liquidity and regulators stand ready to use the same tools we have in the past if there are further pressures that arise that could create contagion."
Asked if she would support a temporary ban on short-selling of bank stocks to take some pressure off of regional banks, she said that was a matter for the Securities and Exchange Commission to decide, and the last use of such controls in 2008 may have made things worse. "If it were being found that there's market manipulation, that's something the SEC certainly could take action against. But short selling more broadly, the bar is pretty high to put controls on," Yellen said.