Yellen told a House Financial Services Committee hearing that refinancings of commercial real estate loans coming due amid higher interest rates and high vacancies due to shifting work patterns "is going to put a lot of stress on the owners of these properties."

Some banks also may come under stress due to lower demand for commercial real estate following the COVID-19 pandemic that shifted more work to home offices, but banking supervisors were "very focused" on helping banks manage these risks.

"I'm concerned. I believe it's manageable, although there may be some institutions that are quite stressed by this problem," Yellen said.

The multi-regulator Financial Stability Oversight Council is focused on commercial real estate and bank supervisory agencies are working closely with banks on ways the institutions can work with borrowers that have problems.

"They're, in some cases, working to make sure that loan loss reserves are built up to cover losses, that dividend policies are appropriate, that liquidity is adequate," Yellen said of the bank regulators.

Nearly a year after the failures of specialist lenders Silicon Valley Bank and Signature Bank shook confidence in regional banks, a fresh sell-off hit the sector last week as New York Community Bancorp (NYCB.N) reported problems in its commercial real estate portfolio, a cautionary sign of potential pain ahead.

In the immediate aftermath of the SVB failure, Yellen said the Treasury would safeguard deposits at failing banks large and small that threatened financial contagion, but later clarified that Treasury had not considered "blanket insurance" for all deposits without approval from Congress.

Asked if she would do whatever is necessary to prevent a second wave of bank failures, Yellen declined comment on individual bank situations but added: "I would work with the banking supervisors to make sure that we addressed anything that looked like it could create systemic risk."