Banking Conditions, Regulatory Updates Discussed in New "ViewPoint"

June 30, 2020

By Michael Johnson, Executive Vice President
Supervision, Regulation, and Credit
Federal Reserve Bank of Atlanta

When I last wrote to you on March 23, we were 10 days past the declaration of the COVID-19 national emergency. Congress, the Treasury, and the Federal Reserve were taking unprecedented actions to stabilize the economy. In response to the crisis, the banking industry implemented measures to modify operations, protect customers and employees, and accommodate affected borrowers. Many in the industry worked around the clock to process two rounds of the Small Business Administration’s Paycheck Protection Plan loans to allow businesses to maintain operations and provide employment. These vital efforts served as a critical lifeline as we now move to prudently reopen the economy. Thank you!

As the economy slowly reopens, actions to promote recovery are ongoing. Last week, the Board requested public comment on a proposal to expand the Main Street Loan Program to include small and medium-sized nonprofit organizations and opened up the program registration process for banks. If you haven’t done so already, please sign up for these programs if they can help your customers.

In March, just after my last letter, the Board announced a pause in examination activity to allow financial institutions to adjust to the COVID-19 operating environment. Recently, the Board announced the resumption of examination activities—albeit in a measured manner—and we intend to continue to be thoughtful with regard to the stress on your employees as well as their health and safety. To that end, we expect that examinations will be conducted offsite for the foreseeable future.

The announcement of restarting examinations was timed to precede the more recent interagency examiner guidance issued on June 23, 2020. That guidance was designed to promote consistency and flexibility in the supervision and examination of financial institutions affected by pandemics. The interagency guidance instructs examiners to consider the unique, evolving, and potentially long-term nature of the issues confronting institutions during this period and to exercise appropriate flexibility in their supervisory response. In keeping with this guidance, as examinations begin, we will work to understand the specific circumstances institutions and their customers face and will not criticize good-faith efforts to assist borrowers consistent with safety, soundness, and prudent risk-management standards.

Our examiners will be involved with a variety of training activities to ensure that they consistently apply these standards, as well as a series of communication and outreach events. For example, on July 9, Federal Reserve governor Michelle Bowman will provide an update on the Fed’s supervisory posture for small banks. Registration is open now at We plan to follow this event with a more targeted discussion via a ViewPoint Live session scheduled for July 28. Please keep an eye open for registration information for this event.

Additional information on supervisory actions to address COVID-19 and other topics is available on our website in Regulatory News.

Recent events
Apart from the pandemic and resulting economic fallout, other recent events have placed a spotlight on persistent injustice and inequality in our society. Atlanta Fed president Raphael Bostic issued a statement on the Federal Reserve System’s important role in helping to end racism and build an inclusive society and economy, citing the Reserve Bank’s own efforts to create an inclusive workplace. “Our aim is to demonstrate, in all of our actions, the simple truth that we will reach our greatest potential only by fully drawing on the talent, expertise, and perspectives of diverse staff and external stakeholders,” President Bostic wrote. Federal Reserve chair Jerome Powell echoed President Bostic’s comments in his semiannual monetary policy remarks to Congress on June 16, stating that “there is no place at the Federal Reserve for racism and there should be no place for it in our society. Everyone deserves the opportunity to participate fully in our society and in our economy.” I am proud of the Federal Reserve’s public stance on these significant issues as well as similar responses throughout the business community. Of course, action is even more important. More information on the Atlanta Fed’s efforts to foster economic mobility is available through our Center for Workforce and Economic Opportunity web page and our Economic Mobility and Resilience web page.

State of the District
It seems almost irrelevant to discuss first-quarter 2020 financial results for the District since it contained more noise than signal at that point. Obviously, provision expenses rose sharply in anticipation of a substantial increase in delinquencies in the second quarter, and they are expected to continue to increase into the third quarter, as the second round of payment deferrals ends. Record low interest rates are pressuring earnings, which could continue over the next few years based on recent monetary policy projections. Although capital and liquidity have improved substantially since the Great Recession, the extraordinary upheaval caused by the virus and associated uncertainty will present challenges. Recently published stress testing information, as well as supplemental scenario analysis, can shed some light on potential future losses.

As always, we welcome your comments or questions. Ongoing feedback from the industry is critical as we work together to respond to the pandemic. Once again, please, do not hesitate to contact us as we work together to manage this challenge. Please share your feedback at

photo of Michael Johnson
Michael E. Johnson

Executive Vice President, Supervision, Regulation, and Credit
The Federal Reserve Bank of Atlanta