Powell: Banks plan to take up Fed’s offer on capital buffers by extending credit to stanch financial impact of coronavirus

Banks have every intention of using their capital buffers to provide more credit, and to work with borrowers, in the face of the coronavirus financial crisis, the chair of the Federal Reserve said Sunday.’

In an audio press conference, Federal Reserve Board Chair Jerome H. (“Jay”) Powell said discussions with banks indicate that they will use the flexibility the Fed announced Sunday to extend more credit and to work with existing borrowers on any troubled loans.

Earlier Sunday, the Fed announced a broad range of actions intended to improve access to credit in response to a worsening financial environment as fears of the impact of the spread of coronavirus grow. Among the actions the Fed announced Sunday: It is encouraging banks to use their capital and liquidity buffers as they lend to households and businesses who are affected by the coronavirus.

The Fed pointed out that the capital buffers are designed “to support the economy in adverse situations and allow banks to continue to serve households and businesses.” The Fed said that it supports firms that choose to use their capital and liquidity buffers to lend and undertake other supportive actions in a safe and sound manner.

Powell told the press on the audio conference that the Fed has offered broad guidance to banks in using the buffers to extend credit. He said that, in response, banks are telling the Fed that they have every intention of doing just that. “There are lots of discussions going on,” the Fed chair said.

In other remarks, Powell said the Fed has a number of liquidity tools left to use if necessary. That includes, he said “plenty of space for forward guidance.”

Powell said he has not yet been tested for coronavirus, but said he feels fine and has displayed no symptoms related to the virus. He said he intends to “observe quite a lot of teleworking,” as he (and the Federal Reserve at large) are working to observe what health professionals “tell us what to do.”

As for himself, he indicated he plans to telework himself – as a model for others.

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