Executives from U.S. banks continue to play down near-term expectations, but they say customers are growing more confident ahead of the rollout of coronavirus vaccines, and that key commercial lending segments could drive an economic rebound.
Some observers said the central bank should have suspended dividends entirely in response to an unprecedented economic emergency caused by the pandemic. Others said its more cautious moves were appropriate because big banks' capital is strong and the economy could bounce back.
In the most sweeping capital distribution order since the financial crisis, the Federal Reserve says it will prohibit big banks from buying back their stock in the third quarter and limit dividend payments to second-quarter levels.
Borrower relief is necessary in a national emergency, but if the exclusion of the deferred loans from troubled-debt restructurings is extended past the end of the year, safety and soundness could be compromised.
Business continuity plans should be used constantly, not just when the crisis is at its peak, says the New York Fed’s head of financial services.
The takeaway from the PPP rollout is that bankers must protect their reputations and limit their risk appetites as they participate in further government-backed rescue programs.
Payouts continue to be relatively generous, but that could change if the Federal Reserve demands banks bolster capital or the economy worsens.
The agency's top supervisory official said the Comprehensive Capital Analysis and Review will proceed on schedule, and signaled that the Fed will look at how institutions are responding to fallout from the coronavirus.
Many argue the economic turmoil from the pandemic makes the Comprehensive Capital Analysis and Review irrelevant this year, while others say testing banks’ capital strength is crucial now more than ever.
The central bank will prioritize monitoring and outreach while reducing examination activity due to the coronavirus pandemic until at least the end of April.