ABSTRACT

Bank Capital and the Coronavirus Crisis: 4 Ways the Federal Reserve Can Improve the Resilience of the Banking System   [open pdf - 0B]

From the Introduction and Summary: "This report outlines the general importance of bank capital requirements, and it details the failures of the Federal Reserve's capital policy both before and after the onset of the coronavirus. It offers four recommendations that would allow the Fed to correct its mistakes. Rather than enact changes that benefit shareholders and executives or endanger the financial system, the Fed should suspend all capital distributions; temporarily delay and reformat the annual stress tests; be willing to require banks to turn to equity markets to raise additional capital if necessary; and indefinitely suspend implementation of an ill-conceived package of capital changes--the stress capital buffer (SCB) rule--which is set to increase the fragility of big banks. These actions would bolster the resilience of the financial system and ensure that banks are able to safely support the real economy during this period of severe stress."

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Date:
2020-05
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Center for American Progress
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Center for American Progress: https://www.americanprogress.org/
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application/pdf
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