Yale School of Management

Posts by Macroprudential Policies

Banks’ Second-Quarter Results Boosted by Non-Interest Income and Official Support

July 24, 2020
In the midst of the COVID-19 lockdown, earnings beat expectations for most large US banks in the second quarter, as a surge in non-interest income offset rising loan-loss provisions, and banks benefitted from Federal Reserve liquidity programs and regulatory forbearance. Continue reading “Banks’ Second-Quarter Results Boosted by Non-Interest Income and Official Support”

No bank should be paying dividends right now

July 14, 2020
This blog was published today in the American Banker . In the midst of one of the fastest and deepest economic declines in U.S. history, the largest banks are expected to pay out about $14 billion in dividends in the third quarter, while remaining under a cap imposed by the Federal Reserve in response to the coronavirus pandemic. Continue reading “No bank should be paying dividends right now”

U.S. Banks to Maintain Dividends for Now, Following Pre-COVID Stress Test

July 1, 2020
Most of the largest U.S. banks announced Monday that they will continue to pay dividends in the third quarter at the same level as the second quarter. This news comes just two business days after the Federal Reserve announced the results of its annual stress test and an unprecedented “sensitivity analysis” estimating the potential impact of different economic recoveries from the COVID recession on bank performance. Based on these scenarios, the Fed announced a number of temporary restrictions on dividends and other corporate actions.  Continue reading “U.S. Banks to Maintain Dividends for Now, Following Pre-COVID Stress Test”

COVID-19 and Insurance (3 of 3): Capital Conservation and Countercyclical Regulation

June 17, 2020
Insurance supervisors around the world outside the U.S. have urged companies they supervise to conserve capital during the COVID-19 crisis by limiting payouts to shareholders and bonuses to executives.  At the same time, many supervisors have sought to help insurers avoid procyclical behavior by mitigating the impact of volatile market swings on the value of insurance company assets and, in turn, on measures of their capital adequacy.  Continue reading “COVID-19 and Insurance (3 of 3): Capital Conservation and Countercyclical Regulation”

COVID-19 and Insurance (2 of 3): Operational Regulatory Relief

June 16, 2020
Many insurance supervisors have provided temporary relief to help companies manage during the COVID-19 crisis. Most of this relief comes in the form of extended deadlines for submitting various reports or provisions that make remote compliance easier. Regulators have also suspended supervisory activities and loosened accounting rules. Continue reading “COVID-19 and Insurance (2 of 3): Operational Regulatory Relief”

COVID-19 and Insurance (1 of 3): Helping Individuals and Businesses

June 15, 2020
Insurance companies face unusual challenges during the COVID-19 crisis. This blog describes efforts by companies and their supervisors to: Reduce financial burdens on insurance customers, for example, by allowing them to defer premium payments.  Resolve the controversy over whether existing insurance coverage extends to businesses that have lost revenue during the crisis. Continue reading “COVID-19 and Insurance (1 of 3): Helping Individuals and Businesses”

Easing Liquidity Regulations to Counter COVID-19

April 27, 2020
Many countries are easing liquidity regulations to help banks get cash to their customers and to prevent liquidity shortages from spreading across financial markets. Countries are addressing liquidity shortages using two main tools: the liquidity coverage ratio (LCR), which most developed countries implemented in recent years as part of the Basel III agreements, and the more traditional reserve requirement ratio. Continue reading “Easing Liquidity Regulations to Counter COVID-19”

Governments Provide Financial Regulatory Relief

April 22, 2020
The COVID-19 crisis has led governments across the world to temporarily ease the operational burden of  supervisory and regulatory activities on the financial institutions they regulate. These regulatory relief efforts can be broken down into three major categories:  Reducing supervisory activities such as stress tests and bank examinations.  Delaying the implementation of new rules or laws.  Reducing reporting requirements. Continue reading “Governments Provide Financial Regulatory Relief”