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In a speech delivered to attendees of a banking industry conference, Federal Reserve Governor Michelle Bowman reassured the audience that bank failures should not be considered an indictment of the regulatory landscape.
Bowman noted the less-than-ideal economic circumstances that have significantly impacted households, businesses and communities nationwide by causing unemployment and disruption of economic activity. In particular, Bowman’s attention was drawn to the fact that the economic fallout of Covid-19 has resulted in several bank failures in the United States over the past year, with the latest example being the failure of $5.5 billion-asset First NBC Bank of New Orleans.
Despite the number of bank failures this past year, Governor Bowman emphasized that the banking system remains sound and resilient. She asserted that banks have strong capital levels, improved liquidity and fewer problem loans, and that most of the recent bank failures “are concentrated in lower- asset, smaller-scale institutions.”
She added that none of the six banks that failed this year had $1 billion in assets, while none of them were members of the Federal Reserve System. Bowman made it clear that these facts signaled that it was not necessary to conclude that the regulatory framework was inadequate, as most of the failed banks had already demonstrated shortcomings in their assessments before the pandemic began.
Bowman emphasized that, although the banking system is resilient, regulators, policymakers and the industry should still remain mindful of the economic and operational risks posed by Covid-19.
As Governor Bowman finalized her speech, she reminded attendees that the Federal Reserve, along with other regulators and banking supervisors, will continue to remain vigilant and ensure that industry standards in the United States remain of the highest caliber.
In conclusion, Bowman made it clear that the recent spate of bank failures is a reflection of the pandemic’s effect on certain sectors and should not be an indictment of the country’s regulatory landscape.