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1 1 (September 10, 2020)

handle is hein.crs/govdbrq0001 and id is 1 raw text is: Researh Setvic COVID-19 Impact on the Banking Industry: Conditions in the Second Quarter of 2020 September 10, 2020 The economic ramifications of the Coronavirus Disease 2019 (COVID-19) pandemic could cause borrowers to miss loan payments, potentially to the point of individual banks or the bank industry becoming distressed. How and to what degree banks will be affected is uncertain. Comprehensive bank data are collected and released quarterly and provide indicators of industry health. On August 25, 2020, the Federal Deposit Insurance Corporation (FDIC) released the Quarterly Banking P.Ttile: Second Quarter 2020, which reports aggregate data from all 5,066 FDIC-insured institutions as of June 30, 2020. This Insight presents certain data that may indicate how the pandemic is affecting banks. Background The COVID- 19 pandemic has caused millions of businesses to close or limit operations and cost tens of millions of people their jobs. Economic downturns can threaten banks because more businesses and households may miss loan repayments. Because most bank assets are these types of loans, the missed payments can reduce bank income and impose significant losses. 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 were to decline enough, a bank's ability to meet those 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 hold certain amounts of capital (in addition to subjecting them to a variety of safety and soundness regulations) in order to avoid failures. If losses were sufficiently large, banks may nevertheless fail, reducing credit available to the economy and potentially destabilizing the financial system. Certain effects and bank responses to economic downturns-such as reduced income and increased loan loss reserves (described below)-occur shortly after the onset of economic deterioration. Other effects- such as increased loan delinquency, incurred losses on assets, and reduced capital value-occur after a longer lag. Congressional Research Service https://crsreports.congress.gov INI 1500 CRS MN GHT Prepa re -r -c- Membersand Co.. n ft i sofon mcC n g ------------------------------------------------------------------------------------------------------------------------------------....................................-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

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