Summary
While supervised firms entered 2022 in sound financial condition, market conditions are changing quickly. The vast majority of firms maintained capital above regulatory minimums. Loan delinquencies were historically low, and liquidity levels generally remained high. Increasing uncertainty about the economic outlook, however, may create new risks for firms to manage. In response to this uncertainty, firms increased credit loss provisions during the first half of 2022 and began taking other steps to prepare for the possibility of weaker economic conditions.
Most firms maintained satisfactory supervisory ratings, and the number of unresolved supervisory findings has been declining; however, some findings are taking longer than expected to remediate, especially for global systemically important banks (G-SIBs) and other large banks. In response, supervisory priorities are focused on firms' remediation of previously identified supervisory findings and risks emerging from changing economic conditions.
This report focuses on developments in three areas:
- Banking System Conditions provides an overview of current financial conditions in the banking sector. In the first half of 2022, financial conditions remained sound as almost all banks reported capital above regulatory minimums, liquidity, though reduced, generally remained ample, and loan delinquencies were historically low. Credit risk, however, has increased. Banks have increased credit loss provisions in anticipation of future loan deterioration.
- Regulatory Developments provides an overview of the Federal Reserve's recent regulatory policy work.
- Supervisory Developments provides an overview of the Federal Reserve's supervisory programs and priorities. In addition to heightening its focus on financial risks, the Federal Reserve is continuing to closely assess firm responses to outstanding supervisory issues. This report also describes differences in supervisory approaches used at financial institutions of different asset sizes and levels of complexity.