The Federal Reserve Board ("FRB") reported on the strength of banking system and the economic impact of the pandemic on borrowers.
In a periodic supervision and regulation report, the FRB stated that during the pandemic, the banking system (i) provided substantial access to lines of credit for corporations, (ii) increased lending to borrowers, particularly small businesses, through the Paycheck Protection Program and (iii) absorbed a significant uptick in deposits. The FRB expressed some concern that the extensive availability of loan forbearance programs may be hiding a potential substantial increase in nonperforming loans that will show as banks again begin to require repayment of loan amounts.
The FRB highlighted actions (measured from October 2019 to October 2020) and cited several rulemakings (starting on page 13) including:
- adopting final management interlock rules;
- revising the Volcker Rule;
- finalizing amendments to the resolution plan requirements and simplifying capital calculations for community banks;
- finalizing rules that simplify the FRB's control analysis regarding banking organizations;
- modernizing the regulations implementing the Community Reinvestment Act; and
- issuing new regulations limiting the interconnections between banks and banking organization concentrations to reduce the financial impact that would result from the failure of the largest banking organizations.
In assessing "Supervisory Developments" (beginning on page 19), the FRB discussed bank regulations on remote supervision as well as the uncertainties of assessing banking risk related to climate change.
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