Fed Bank Supervision Report Illustrates Industry Health

The Federal Reserve on Friday released a report on its regulatory and supervisory activities for banking companies demonstrating the health and soundness of the banking industry. Figures in the report show that industry profitability ratios are at their highest levels since 2007. The report comes as Fed Vice Chairman for Supervision Randal Quarles prepares to testify later this week on Capitol Hill.

Nonperforming loans have reached their lowest point since the run-up to the financial crisis, and capital levels are substantially higher, the report noted. The share of institutions not well-capitalized is lower than at any point since 2006. The report also showed that the 10 largest banking firms’ concentration of outstanding loans and leases continues to shrink.

The report also outlined upcoming supervisory priorities for firms in different Fed supervisory portfolios. For the largest firms, the Fed is focusing on several aspects of capital, liquidity, governance and controls and recovery and resolution planning, while at other large U.S. and foreign banks, the focus is on more tailored topics within those categories. For regional and community banks, the Fed is looking at credit risk, operational risk, sales incentives, liquidity risk and Bank Secrecy Act compliance.