Nineteen of the nation's largest banks must show how they'd withstand pressures in the commercial real estate and corporate debt markets that would accompany a severe global recession.
Federal Reserve Chair Jerome Powell said the central bank will consider the pace of coronavirus vaccinations and other factors to determine if restrictions on dividends and share repurchases will continue.
Temporary policy responses have mitigated problems in the short-term funding markets related to the pandemic, but permanent fixes may be necessary in some areas, the agency said in a report.
Defaults have been milder than expected thanks to government relief and stricter underwriting. But with the crisis dragging on and policymakers unable to agree on a stimulus plan, loans to highly indebted companies remain at risk.
The company seeks to help funnel more loans to minority businesses and consumers; the regulator says short-staffed banks are having trouble handling new government programs.
The central bank's Financial Stability Report said companies may face difficulties repaying debt given lower earnings, “which could trigger a sizable increase in firm defaults."
The two sides say a deal to replenish the small business loan program may be reached for a Senate vote early this week; big restaurant chains said to edge out small firms for loans.
Loans to other financial firms have soared in recent years, and many are going to private equity or business development firms that then use the funds to make leveraged loans. Should regulators be worried?
