Fed shifts to monitoring, outreach to financials; reduces exam activities

CCAR capital plans for large banks still due by April 6

Monitoring and outreach to help financial institutions will be the focus of action, and examination activities will be reduced – especially at smaller banks – by the Federal Reserve, the central bank said in a statement late Tuesday outlining its latest responses to the coronavirus crisis.

However, the central bank also said that capital plans by large banks would still be due by April 6, as required under its Comprehensive Capital Analysis and Review (CCAR) program.

Additionally, the Fed said that “additional time will be granted for resolving non-critical existing supervisory findings” at financial institutions and firms – to allow, the central bank said, for those firms to “focus on heightened risks in this current environment and assist consumers.”

“The Board recognizes that the current situation is significantly affecting areas of the country in different ways and will work with financial institutions to understand the specific issues they are facing,” the agency said in the statement, referring to the coronavirus sweeping across the country.

An increased focus on monitoring, the Fed said, will concentrate on “understanding challenges and risks that the current environment presents for customers, staff, firm operations and the financial condition of the financial firm.” For the largest firms, the Fed said, that list will also include risks to financial stability.

Analysis of operations, liquidity, capital, asset quality, and impact on customers will be a focus for all institutions, the agency said (with additional focus for large institutions on operational resiliency and potential impact on broader financial stability).

On examinations, the Fed said all examination activities will be conducted off-site until normal operations are resumed at the bank and reserve banks.

Banks with less than $100 billion in total assets will generally see no regular exam activity, the agency said – except where an exam is critical to safety and soundness or consumer protection, or necessary to address an urgent or immediate need. The Fed said it intends to reassess its approach to examinations in the last week of April to determine whether conditions have changed.

Banks with more than $100 billion in assets will see a deferred, significant portion of their planned exam activity “based on its assessment of the burden on the institution and the importance of the exam activity to the supervisory understanding of the firm, consumer protection, or financial stability,” the Fed said.

As for the CCAR exercise, the Fed said the capital plans that firms develop and submit by April 6 would be used to monitor how the firms are managing their capital in the current environment, planning for contingencies, and positioning themselves to continue lending to creditworthy households and businesses.

Federal Reserve provides additional information to financial institutions on how its supervisory approach is adjusting in light of the coronavirus