Banks faring well with strong capital, liquidity levels, Fed reports

U.S. banking organizations continue to maintain strong capital and liquidity levels, with healthy loan growth and continued profitability, the Federal Reserve said in a report issued Tuesday.

In its latest financial supervision and regulation report, the Federal Reserve paints a rosy picture of the banking landscape. The report serves as the basis for the semi-annual testimony before Congress of Federal Reserve Board Vice Chair for Supervision Randal Quarles. He is expected to testify next week before both Senate and House Committees.

The report also notes that banks are continuing to improve risk management and repair previously identified supervisory findings. The report stated that banking organizations “continue to maintain strong capital and liquidity levels, while demonstrating healthy loan growth and improved profitability, allowing them to continue supporting households and businesses throughout the economic cycle,” the report stated.

“In particular, the number of outstanding supervisory findings has decreased for banks of all sizes,” the report states. “Current supervisory findings remain concentrated in nonfinancial areas, such as governance and risk management.”

In other areas, the report states:

  • Recent stress test results show that capital levels of large firms remain above regulatory minimums even after a hypothetical severe recession. “Using stress tests and other supervisory tools, the Federal Reserve continues to promote financial resiliency by monitoring the adequacy of the capital and liquidity positions of supervised institutions, as well as their lending standards, asset quality, profitability, and risk management practices,” the report states.
  • The most stringent regulatory and supervisory requirements are applied to the largest systemically important banking organizations. Firms with smaller risk profiles have less stringent requirements. “Effectively tailoring supervisory expectations minimizes compliance burden without compromising an institution’s safety and soundness,” the report states.
  • The Fed continues to promote the principles of efficiency, transparency, and simplicity in its approach to supervising and regulating institutions.

Federal Reserve Supervision and Regulation Report, Nov. ‘19

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