InfoBytes Blog
Fed report discusses banking system, cancels non-critical examinations
On May 8, the Federal Reserve Board (Fed) issued its Supervision and Regulation Report, which summarizes banking system conditions and the Fed’s supervisory and regulatory activities. The annual report discusses the safety and soundness of the banking industry, and explains the Fed’s response to Covid-19 pandemic. The report notes that actions taken by the Fed “use existing flexibility in the regulatory and supervisory framework and do not roll back the measures that allowed the banking sector to enter this crisis as a source of strength….” The report emphasizes that the banking system started 2020 in a healthy financial position, which helped enable institutions to “absorb higher credit losses will continuing to lend during times of stress.” The report notes that banks are facing significant operational challenges as a result of social distancing measures, and that during the first quarter of 2020, U.S. bank earnings declined sharply; however, strains in bank funding markets have somewhat eased since their stressed condition in March. As for the Fed’s supervisory activities, the report states that the Fed has deferred or cancelled non-critical examinations at large financial institutions for the remainder of the year. Specifically, the report notes that “examination activity will reflect operating conditions and will continue to target areas of heightened risk due to containment measure-related developments as well as known deficiencies that existed prior to the current crisis.”