InfoBytes Blog
Fed report highlights banks’ Covid-19 responses
On November 6, 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 current report discusses the safety and soundness of the banking industry, especially with respect to economic and financial stresses resulting from Covid-19 containment measures. The report highlights, among other things, that Fed programs “have helped to preserve the flow of credit” and that banks have taken several actions to maintain financial and operational resiliency. These actions include providing access to substantial lines of credit for corporate borrowers and playing a significant role in supporting small businesses through the Paycheck Protection Program. In addition, the report notes that loan growth has grown slightly since the beginning of the year and that capital positions and liquidity conditions remain strong. However, the report cautions that while “economic indicators have shown marked improvement since the second quarter, a high degree of uncertainty persist.” The report also details the Fed’s current areas of supervisory focus and describes how banks have adapted to a largely remote working environment.
The same day, the Fed also announced updates to the list of firms supervised by its Large Institution Supervision Coordinating Committee Program, which is responsible for supervising the largest and most complex firms. As a result, “certain foreign banks with U.S. operations that have substantially decreased in size and risk over the past decade will move to the Large and Foreign Banking Organization supervision portfolio, where they will be supervised with other banks of similar size and risk.” The Fed stresses that the “portfolio move will have no effect on the regulatory capital or liquidity requirements of any firm.”