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One size does not fit all regarding regulations for financial institutions, Federal Reserve Chair Janet Yellen said yesterday during a House Financial Services Committee hearing. She said the Fed's rules and supervisory approaches should be tailored to individual institutions.

"One of the Federal Reserve's fundamental goals is to make sure that our regulatory and supervisory program is tailored to the risk that different financial institutions pose to the system as a whole," she said. "Small and medium-sized banking organizations – whose failure would generally pose much less risk to the system – should be subject to standards that are materially less stringent."

During Wednesday's hearing evaluating the Federal Reserve's supervision and regulation of the financial system, panel members, including Ranking Member Maxine Waters, D-Calif., Rep. Ed Royce, R-Calif., and Rep. Frank Guinta, R-N.H., also pressed Yellen on smaller financial institutions' regulatory burdens.

During questioning by Guinta, Yellen suggested that Congress write legislation carving community banks out of the Dodd-Frank Act's incentive-based compensation limits and the Volcker rule.

Yellen was also questioned by Rep. Carolyn Maloney, D-N.Y., on the Federal Open Market Committee's decision last week to not raise rates. She said a rate increase is still possible this year.

Much of Wednesday's hearing focused on those financial institutions labeled "too big to fail." Oversight and Investigations Subcommittee Chairman Sean Duffy, R-Wis., said the Dodd-Frank Act was supposed to do away with these large financial institutions. Yellen said the Fed has made progress making these institutions safer and more secure. Rep. Michael Capuano, D-Mass., echoed his sentiment and said more needs to be done.

Capuano also expressed much concern with the Fed's action on Wells Fargo's creation of more than 2 million fraudulent consumer accounts. He listed many offenses committed by the bank over the recent years and asked why the Fed hasn't done something more about it.

The House Financial Services Committee today will hear from Wells Fargo Chairman and CEO John Stumpf on the bank's recent actions. The hearing is slated to begin at 10 a.m. Eastern.