Fed Chairman Powell: U.S. Financial System ‘Strong, Resilient’

The nation’s financial system is “strong and resilient” overall, Federal Reserve Chairman Jerome Powell told members of the Senate Banking Committee today. During his annual testimony, Powell pointed to a higher capital and liquidity levels, strong profitability, a lack of bank failures in 2018 and better risk management practices as indicators that banks are well-positioned to weather potential stress.

Powell noted that the implementation of the S. 2155 regulatory law remains “a very high priority” for the Federal Reserve, and that the agency is currently in the process of reviewing comments on several related proposals, including those to provide Volcker Rule relief to community banks, establish a community bank leverage ratio and better tailor enhanced prudential standards. The Fed is also working to revise guidance for midsize banks that would clarify recent changes to stress testing requirements for those institutions, he said.

Touching on the issue of cannabis in banking — which the American Bankers Association has flagged as an industry priority this year — Powell acknowledged that “financial institutions . . . are in a very difficult position” due to discrepancies between federal and state laws on marijuana legalization. He added that for both banks and regulators, “it would be great to have clarity” on this issue.