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1 1 (October 13, 2021)

handle is hein.crs/goveeqe0001 and id is 1 raw text is: Congressional SResearch Service lnforming the Iegisiative debate since 1914___________________ COVID-19-Related Impact on the Banking Industry: Conditions in the Second Quarter 2021 October 13, 2021 Bank regulation is designed to allow banks to withstand some amount of unexpected losses. Some observers have worried that the economic ramifications of the Coronavirus Disease 2019 (COVID-19) pandemic could result in enough borrowers missing loan payments to cause distress for banks. This Insight presents bank industry statistics through the second 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 (discussed below)-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 IN11501, 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 expired on September 30, 2021, signs of stress may begin to emerge. The Federal Deposit Insurance Corporation (FDIC) releases comprehensive data on bank conditions and quarterly income. The Quarterly Banking Profile: Second Quarter 2021 reports aggregate data from all 4,951 FDIC-insured institutions as of June 30, 2021. Congressional Research Service https://crsreports.congress.gov IN11774 CRS INSIGHT Prepared for Members and Committees of Congress