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

1 1 (April 20, 2020)

handle is hein.crs/govdadh0001 and id is 1 raw text is: i% 'N\ r Bank Exposure to COVID-19 Risks: Business Loans April 20, 2020 The COVID-19 (coronavirus) pandemic has caused financial hardship across the country. If COVID-19 causes borrowers to miss loan pa'yineats, it could have negative consequences for banks. This Insight examines the exposure banks have to business loan repayments, such as commercial and industrial (C&I) loans and commercial real estate (CRE) loans. For exposure to household debt, such as mortgages and consumer loans, see CRS Insight IN11336, Bank Exposure to COVID-19 Risks: Mortgages and Consumer Loans, by David W. Perkins and Raj Gnanarajah. The main business of a bank is to make loans and buy securities using funding it raises by taking deposits. A bank earns money largely through borrowers making payment on those loans and securities issuers making payment on securities, along with charging fees for certain services. In addition to accepting deposits, a bank also raises funding by issuing debt (such as bonds) and capital (such as stock). Unlike deposits and debt that place specific payment obligations on a bank, payments on capitai can generally be reduced, delayed, or cancelled and the value of capital can be written down. Thus, if incoming payments unexpectedly stop, capital allows a bank to withstand losses to a point. However, if a bank exhausts its capital reserves, it could face financial distress and potentially fail. Business Loans A significant portion of a typical bank's assets consists of loans to businesses, which individuals or companies use to start or expand an enterprise, purchase CRE or equipment, or pay wages to support ongoing operations. CRE loans are secured by the land and building in which the business operates, such as a small-town shop or restaurant, a commercial park, a factory, or a skyscraper. These may be owner occupied (i.e., wherein the owner operates the business) or non-owner occupied (i.e., the business pays rent to the owner). C&I loans, another category of loans to businesses, are unsecured or secured by collateral other than real estate, such as equipment. In all these cases, loan repayment depends on a sufficient inflow of cash to the underlying businesses. Congressional Research Service https://crsreports.congress.gov IN11348 CRS NSMGHT Prepred for Members aisd C o m m itte esn o fo f o o rfre s s ------------------------..--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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