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By Victoria Guida | March 17, 2020
Federal bank regulators today moved to make it easier for lenders to reduce their loss-absorbing capital as they aim to clear the path for banks to keep credit flowing amid economic stress from the coronavirus pandemic.
The move adjusts capital rules so the penalties banks face for incremental decreases in capital will be more gradual. That change will make it easier for banks to stop holding their capital levels above what it required and even dip into their required capital buffers.
The FDIC and Office of the Comptroller of the Currency also joined the Federal Reserve in calling for banks to use their capital and liquidity buffers in a responsible manner “to support the economy in adverse situations and allow banking organizations to continue to serve households and businesses.”
Essentially, banks will have more freedom to allow their debt levels to rise slightly and to dip into their rainy-day cash funds.
Read the full article in Politico Pro here.
Read the interim final rule, which facilitates the use of firms' capital buffers to promote lending activity to households and businesses, here.