The Federal Reserve, FDIC and OCC today issued a statement calling on banks to use their capital and liquidity buffers to help meet the needs of households and businesses as the coronavirus pandemic continues. The agencies noted that banks have “built up substantial levels of capital and liquidity in excess of regulatory buffers and minimums” in the years since the financial crisis.
“The agencies support banking organizations that choose to use their capital and liquidity buffers to lend and undertake other supportive actions in a safe and sound manner,” the statement said. “The agencies expect banking organizations to continue to manage their capital actions and liquidity risk prudently.”
The agencies also issued an interim final rule to facilitate the use of capital buffers to bolster lending. The rule, which takes effect upon publication in the Federal Register, revises the definition of eligible retained income for all depository institutions, bank holding companies and savings and loan holding companies subject to the agencies’ capital rule. The revised definition of eligible retained income will make any automatic limitations on capital distributions that could apply under the agencies’ capital rules more gradual.