Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency
The federal bank regulatory agencies today announced two actions to support the U.S. economy and allow banks to continue lending to households and businesses. They are:
- A statement encouraging banks to use their resources to support households and businesses; and
- A technical change to phase in, as intended, the automatic distribution restrictions gradually if a firm’s capital levels decline.
The statement notes that banks have more than doubled their capital and liquidity levels over the past decade and are now substantially safer and stronger than they were previously. As a result, the agencies are encouraging banks to use that strength to support households and businesses. The statement is substantially similar to one issued by the Federal Reserve Board earlier this week.
The technical change is an interim final rule that, if a bank’s capital declines by a certain amount, phases in the agencies’ automatic distribution restrictions gradually, as intended. Like the statement, the interim final rule facilitates the use of firms’ capital buffers to promote lending activity to households and businesses.
Statement on the Use of Capital and Liquidity Buffers
The Board, FDIC, and Office of the Comptroller of the Currency (agencies) are encouraging
banking organizations to use their capital and liquidity buffers as they respond to the challenges
presented by the effects of the coronavirus.
Since the global financial crisis of 2007-2008, U.S. banking organizations have built up
substantial levels of capital and liquidity in excess of regulatory minimums and buffers. The
largest banking organizations hold $1.3 trillion in common equity and $2.9 trillion in high
quality liquid assets (HQLA). The agencies also significantly increased capital and liquidity
requirements, including improving the quality of regulatory capital, raising minimum capital
requirements and establishing capital and liquidity buffers, and implementing annual capital
stress tests.
These capital and liquidity buffers were designed to provide banking organizations with the
means to support the economy in adverse situations and allow banking organization to continue
to serve households and businesses. The agencies support banking organizations that choose to
use their capital and liquidity buffers to lend and undertake other supportive actions in a safe and
sound manner. The agencies expect banking organizations to continue to manage their capital
actions and liquidity risk prudently
Federal Register notice: Interim Final Rule (PDF)