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1 1 (September 9, 2021)

handle is hein.crs/goveemf0001 and id is 1 raw text is: S Congressional SResearch Service COVID-19-Related Impact on the Banking Industry: Conditions in the First Quarter 2021 September 9, 2021 Although bank regulation is designed to allow banks to withstand some amount of unexpected losses, some worry that the economic ramifications of the COVID-19 pandemic could result in enough borrowers missing loan payments to cause distress for banks. This Insight presents certain bank industry statistics for the first quarter 2021 and examines how the pandemic might be affecting the industry. Background Economic downturns jeopardize bank income as the likelihood of losses from missed payments increases, ultimately reducing bank profitability. Meanwhile, bank liabilities-the deposits they hold and the debt they owe-obligate banks to make funds available to depositors and creditors. If borrower repayments decline enough, a bank's ability to meet its obligations could become impaired, potentially causing it to fail. In contrast, bank capital-largely equity stock and retained profits from earlier periods-enables a bank to absorb a certain amount of losses without failing. For this reason, bank regulators require banks to hold certain amounts of capital (in addition to subjecting them to a variety of safety and soundness regulations) to avoid failures. Certain effects of, and bank responses to, economic downturns-such as reduced income and increased credit loss reserves-occur shortly after the onset of economic deterioration. Other effects-such as increased loan delinquency, incurred losses, and reduced capital value-occur after a longer lag. (See CRS Insight IN 11501, COVID-19 Impact on the Banking Industry: Lag Between Recession and Bank Distress.) Currently, the bank industry appears to be holding up well. However, as the pandemic continues to affect the economy and the option to request loan forbearances expires on September 30, 2021, signs of stress may emerge. The Federal Deposit Insurance Corporation (FDIC) releases comprehensive data on bank condition and income quarterly. The Quarterly Banking Profile: First Quarter 2021 reports aggregate data from all 4,978 FDIC-insured institutions as of March 31, 2021. Congressional Research Service https://crsreports.congress.gov IN11746 CRS INSIGHT Prepared for Membersand Committeesof Congress