The Banking Industry and COVID-19: Lifeline or Life Support?

Finnegan, Madeline; Hamerling, Sarah Ngo; Hirtle, Beverly; Kovner, Anna; Luck, Stephan; Plosser, Matthew

Discussion Paper

The Banking Industry and COVID-19: Lifeline or Life Support?

Abstract: By many measures the U.S. banking industry entered 2020 in good health. But the widespread outbreak of the COVID-19 virus and the associated economic disruptions have caused unemployment to skyrocket and many businesses to suspend or significantly reduce operations. In this post, we consider the implications of the pandemic for the stability of the banking sector, including the potential impact of dividend suspensions on bank capital ratios and the use of banks’ regulatory capital buffers.

Keywords: COVID-19; crisis; recession; Great Recession; capital loss; banking industry;

JEL Classification: G31; G21; I15;