Summary
The banking system was a source of strength through the COVID event. As the broader economy continues to recover, the Federal Reserve continues to closely monitor banking conditions, including banks' risks and operations.
In response to the COVID event, the Federal Reserve made temporary adjustments to its regulations and supervisory programs. These adjustments helped the banking industry meet the needs of customers and communities. In addition, the Federal Reserve modified its supervisory programs and approaches to allow banks to focus on their operations, conducting more supervision off site. Examinations were either paused or moved to monitoring exercises.
As the economy continues to recover, supervisory approaches have begun returning to normal. Many of the temporary adjustments to supervisory programs have ended. However, supervisors will maintain a focus on risks that may persist in this period of recovery.
This report focuses on developments in three areas:
- Banking System Conditions provides an overview of current financial conditions in the banking sector. The first half of 2021 showed that banking conditions continued to improve from strong positions in 2020. Potential risks from the COVID event remain and will continue to be monitored. The report describes measures of health of the system, as well as areas of focus given ongoing uncertainty.
- 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. Supervisory activities are returning to pre-COVID approaches, but potential COVID-event risks remain a priority. The report also highlights differences in supervisory approaches among large, community, and regional banking organizations.