The Forum’s COVID Update: Issue 4

25 Jun 2020

Forum Members are Safe and Strong

Today, the Federal Reserve will issue the results of its 2020 Comprehensive Capital Analysis and Review (CCAR), an annual test that measures the strength and resiliency of 34 large banks against a hypothetical scenario of significant strain on the economy. However, given the unprecedented global health pandemic that has shocked local economies around the world, America’s largest banks have been put to the test with the reality of a national crisis over the past few months. And, Forum members have demonstrated that they are a source of strength and support for consumers, businesses and communities across the country.

Our institutions are lending — during the first quarter they increased lending to businesses of all sizes by more than 15 percent, an unprecedented increase. Our institutions are supporting small business — as of June 10, Forum banks made or approved more than 773,000 PPP loans to small businesses, totaling nearly $70 billion. And our institutions are supporting financial security — in the first quarter, total deposits at Forum institutions rose more than 13 percent ($818 billion).

Our strength is supported by efforts taken since 2010 to improve the quality and quantity of our capital, which acts as a cushion in times of stress. Over the past decade, our Tier 1 capital, which is highly absorbent in times of shocks, has increased 40% to $910 billion as of the first quarter. In fact, Tier 1 capital now accounts for 84 cents of every $1 of capital, a 10 percent increase since 2010.

This year’s CCAR is different, both as a result of the COVID-19 pandemic and a revised process for setting a key capital buffer and approving capital distributions. Accordingly, our members will take time to carefully review the CCAR results that the Federal Reserve releases today. But we will continue our work to support the economy in this difficult time and use the strength that has been built over the past decade to be a part of the solution to the challenges we face today and in the months ahead. – Kevin Fromer, Forum President & CEO

Forum Spotlight: Bank of America’s $1 Billion/4-Year Commitment to Support Economic Opportunity Initiatives

This month, Bank of America announced that it is making a $1 billion, four-year commitment of additional support to help local communities address economic and racial inequality accelerated by the global pandemic. The programs will be focused on assisting people and communities of color that have experienced a greater impact from the health crisis in areas that include:

  • Virus testing, telemedicine, flu vaccination clinics, and other health services, with a special focus on communities of color.
  • Partnerships with historically black colleges and universities and Hispanic-serving institutions in the United States for hiring, research programs, and other areas of mutual opportunity.
  • Support to minority-owned small businesses, including clients and vendors.
  • Career reskilling/upskilling through partnerships with high schools and community colleges.
  • Operating support and investment for affordable housing/neighborhood revitalization, leveraging the company’s nearly $5 billion in Community Development Banking.
  • Further recruitment and retention of teammates in low-to-moderate-income and disadvantaged communities to build on work the company has already done to serve clients locally.

The work will sharpen the focus of many existing projects, accelerate resources, and add a particular emphasis on health services during the pandemic. The announcement is aligned with the company’s commitment to responsible growth for clients, shareholders, employees and communities. (More from Bank of America)

Forum Analysis: How Large Banks Managed a Massive Liquidity Shock

The months following the onset of the COVID-19 pandemic in the United States saw the largest liquidity shock ever observed since data first became available in 1973, according to new research by economists at Boston College and the Federal Reserve Board.

Most of the increased demand for liquidity was met by large banks. While this unprecedented demand put significant pressure on the liquidity reserves of large banks, they met client demands and provided much needed liquidity to the corporate sector while still maintaining adequate amounts of bank liquidity.

Cumulative C&I Loan Growth by Bank Size

Source: Li et al. “Banks as Lenders of First Resort: Evidence from the COVID-19 Crisis”

Large banks’ willingness to provide liquidity at a time when the value of liquidity was near an all-time high speaks clearly to large banks’ ability and willingness to support their clients and the U.S. economy during a difficult period. – Sean Campbell, Forum Chief Economist, Head of Policy Research (More on the BankNotes Blog)

Forum Spotlight: Goldman Sachs Increases Small Business Commitment to $775 Million

Goldman Sachs committed an additional $250 million to fund the Small Business Administration’s Paycheck Protection Program (PPP) loans through Community Development Financial Institutions (CDFIs) and other mission-driven lenders.

The firm also launched partnerships with the National Urban League and the U.S. Hispanic Chamber of Commerce (USHCC) to ensure that both capital and information reach minority-owned businesses. These organizations, two of Goldman Sachs’ 10,000 Small Businesses program’s earliest partners, are well-positioned to provide technical support to those minority business owners applying for PPP loans, while ensuring they reach traditionally underserved communities.

“As we face the most severe economic challenges in generations, we value partners like Goldman Sachs who are helping to build stronger, financially stable communities and open the doors of opportunity for entrepreneurs of color” said National Urban League President and CEO Marc H. Morial.

Goldman Sachs has fully allocated its initial commitments of $500 million in capital, as well as $25 million in grants to CDFIs and other mission-driven lenders, which were provided to ensure these organizations have the necessary capacity to underwrite and deliver loans to small businesses as soon as possible. (More from Goldman Sachs)