Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Fed's George says strains on financial industry could still mount

Published 09/25/2020, 12:19 PM
Updated 09/25/2020, 12:20 PM
© Reuters. Kansas City Federal Reserve Bank President Esther George addresses the National Association for Business Economics in Denver

© Reuters. Kansas City Federal Reserve Bank President Esther George addresses the National Association for Business Economics in Denver

WASHINGTON (Reuters) - The current recession's impact on households and businesses could still risk the sort of damage to the banking system that the United States has avoided so far, Kansas City Federal Reserve president Esther George said on Friday.

Throughout the pandemic Fed officials have taken solace in the fact that it has not yet led to a wave of mortgage, business or other defaults that could cripple banks, cause them to stop lending, and deepen the recession.

But "the economic recovery...is far from complete," George said in remarks prepared for delivery via the web to the Independent Bankers of Colorado. "Strains on household and commercial balance sheets since March have created fragilities that could yet threaten bank profitability and loss-absorbing capacity for some time."

She is the second Fed official, along with Boston Federal Reserve bank president Eric Rosengren, to explicitly warn this week that credit strains could still mount as the recession and health crisis persist.

Community banks in particular, George said, given their exposure to volatile agriculture markets and the strained commercial real estate industry, "must remain vigilant."

"Strained business revenues and commodity prices threaten the ability of some borrowers to repay their obligations," she said.

George also said she was concerned that the pandemic and recent regulatory changes may speed consolidation in the banking industry, with "both regulation and monetary policy...tilting the scales in favor of larger banks."

© Reuters. Kansas City Federal Reserve Bank President Esther George addresses the National Association for Business Economics in Denver

Arguments to ease capital requirements for larger banks are "not compelling," George said, noting that larger firms "distributed more than $50 billion of capital through shareholder dividends and share repurchases" even as the pandemic took hold.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.