High commercial real estate vacancies are expected to create stress for smaller banks, according to Treasury Secretary Janet Yellen. However, Yellen stated that she does not see them as causing a systemic risk to the nation’s financial system. Yellen made these remarks during her annual testimony before the Senate Banking Committee. She acknowledged the potential stress and losses associated with high office building vacancy rates, high interest rates, and falling valuations. Yellen expressed confidence in the manageability of the issue and highlighted the efforts of banking regulators and the Financial Stability Oversight Council to support borrowers.