Powell: Fed ‘Not Looking to Raise Capital Standards During Crisis’

Testifying before the House Financial Services Committee today, Federal Reserve Chairman Jerome Powell again emphasized the strong position of the financial sector going into the COVID-19 pandemic and noted that banks have performed well in their response to the crisis. “The banks have been taking on a wave of deposits, they’ve been engaging in forbearance, they’ve been making loans,” he told House lawmakers. “They’re a source of strength in this situation.”

According to a sensitivity analysis the Fed conducted alongside the recent Comprehensive Capital Analysis and Review process, “we found that the majority of firms were still sufficiently capitalized” under three different recovery scenarios, Powell said. He added that recent actions by the Federal Reserve to halt stock buybacks and dividend distributions were taken to preserve the level of capital in the banking system.

Powell added that as part of its monitoring efforts, the Fed will require large firms participating in CCAR to resubmit their capital plans later in the year, and said that the agency would provide additional clarity “in terms of the precise metrics we’ll be looking at.” He emphasized, however, that “we’re not looking to raise capital standards during a crisis—that’s not what’s going on here.”