About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

1 1 (March 17, 2021)

handle is hein.crs/govecrl0001 and id is 1 raw text is: u Congressional tResearch Service COVID-19 Impact on the Banking Industry: Conditions at the End of 2020 March 17, 2021 Although bank regulation is designed to allow banks to withstand some amount of unexpected losses, the economic ramifications of the Coronavirus Disease 2019 (COVID-19) pandemic could result in enough borrowers missing loan payments to cause distress for banks. The Federal Deposit Insurance Corporation (FDIC) releases comprehensive data on bank condition and income quarterly, and it recently released the Quarterly Banking Profile: Fourth Quarter 2020, which reports aggregate data from all 5,001 FDIC- insured institutions as of December 31, 2020. This Insight presents certain bank industry statistics as of the end of 2020 and examines how the pandemic might be affecting the industry. Background Economic downturns threaten bank profitability, reduce bank income, and impose losses as borrowers miss repayments. Meanwhile, bank liabilities-the deposits they hold and the debt they owe-obligate banks to make funds available to depositors and creditors. If borrower repayments decline enough, a bank's ability to meet its obligations could become impaired, potentially causing it to fail. In contrast, bank capital-largely equity stock and retained profits from earlier periods-enables a bank to absorb a certain amount of losses without failing. For this reason, bank regulators require banks to hold certain amounts of capital (in addition to subjecting them to a variety of safety and soundness regulations) in order to avoid failures. However, if losses are sufficiently large, banks may nevertheless fail, reducing credit available to the economy and potentially destabilizing the financial system. Certain effects of, and bank responses to, economic downturns-such as reduced income and increased credit loss reserves-occur shortly after the onset of economic deterioration. Other effects-such as increased loan delinquency, incurred losses, and reduced capital value-occur after a longer lag (see CRS Insight IN 11501, COVID-19 Impact on the Banking Industry: Lag Between Recession and Bank Distress). Thus far, the bank industry appears to be holding up well, but as the pandemic continues to affect the economy, signs of stress may start to emerge. Congressional Research Service https://crsreports.congress.gov IN11636 CRS INSIGHT Prepared for Membersand Committeesof Congress

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most