Resilience of Community Banks in the Time of COVID-19

Kwan, Simon H.

Journal Article

Resilience of Community Banks in the Time of COVID-19

Abstract: Stress tests in December 2020 showed that the largest U.S. banks had strong capital levels and could continue to lend to households and businesses under hypothetical severe recessions. Assessing thousands of small community banks against similar criteria suggests that, while about one-fifth could fall below adequate capitalization, only a handful of those risk becoming insolvent. Overall, this is a reassuring view for small banks and their communities, suggesting that the risk of widespread bank failures leading to financial instability appears to be small.

Keywords: COVID-19; community banks; stress tests; resilience;