STATEMENT OF
JELENA MCWILLIAMS
CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
on
OVERSIGHT OF PRUDENTIAL REGULATORS: ENSURING THE SAFETY,
SOUNDNESS, DIVERSITY, AND ACCOUNTABILITY OF DEPOSITORY
INSTITUTIONS
before the
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
December 4, 2019
2128 Rayburn House Office Building
JELENA MCWILLIAMS
CHAIRMAN
FEDERAL DEPOSIT INSURANCE CORPORATION
on
OVERSIGHT OF PRUDENTIAL REGULATORS: ENSURING THE SAFETY,
SOUNDNESS, DIVERSITY, AND ACCOUNTABILITY OF DEPOSITORY
INSTITUTIONS
before the
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
December 4, 2019
2128 Rayburn House Office Building
1
Chairwoman Waters, Ranking Member McHenry, and members of the Committee, thank
you for the opportunity to testify before the House Committee on Financial Services.
Exactly 18 months ago, I began serving as the 21st Chairman of the Federal Deposit
Insurance Corporation (FDIC). During this period, the FDIC has undertaken a significant
amount of work with a particular emphasis on three overarching goals:
• Strengthening the banking system as it continues to evolve;
• Ensuring that FDIC-supervised institutions can meet the needs of consumers and
businesses; and
• Fostering technology solutions and encouraging innovation at community banks and the
FDIC.
The FDIC has made significant progress in each of these areas, and I appreciate the
opportunity to share with the Committee how we will continue to move each of them forward.
I. State of the U.S. Banking Industry
Before discussing the FDIC’s work to strengthen the banking system, I would like to
begin by providing context regarding the current state of the industry.
The U.S. banking industry has enjoyed an extended period of positive economic growth.
In July, the economic expansion became the longest on record in the United States. By nearly
every metric – net income, net interest margin, net operating revenue, loan growth, asset quality,
loan loss reserves, capital levels, and the number of “problem banks” – the banking industry is
strong and well-positioned to continue supporting the U.S. economy.
With respect to profitability, banks of all sizes are performing well. In the third quarter
of 2019, the 5,256 FDIC-insured banks and savings institutions reported net income of $57.4
billion.1 Nearly 62 percent of institutions reported annual increases in net income, and only
about 4 percent of institutions were unprofitable. Notably, community banks reported net
income of $6.9 billion, an increase of 7.2 percent from a year earlier. Net interest margin also
remained stable, with an average of 3.35 percent across the industry and a particularly strong
average of 3.69 percent among community banks. Finally, net operating revenue totaled over
$208 billion, an increase of 2.2 percent from a year earlier.
Key balance sheet indicators are similarly robust. Total loan balances increased by 4.6
percent, up from the 4.5 percent growth rate reported the previous quarter. Again, community
banks performed particularly well in this area, with an annual rate of loan growth that was
stronger than the overall industry. Asset quality also remained strong, as the rate of noncurrent
loans (i.e., loans that are 90 days or more past due) declined to 0.92 percent. Finally, the
industry’s capacity to absorb credit losses improved from a year earlier, as the reserve coverage
ratio (i.e., loan-loss reserves relative to total noncurrent loan balances) rose to 131 percent.
1 See FDIC Quarterly Banking Profile, Third Quarter 2019, available at
https://www.fdic.gov/bank/analytical/qbp/2019sep/qbp.pdf. Unless otherwise indicated, all statistics are derived
from this report as of the third quarter of 2019.
Chairwoman Waters, Ranking Member McHenry, and members of the Committee, thank
you for the opportunity to testify before the House Committee on Financial Services.
Exactly 18 months ago, I began serving as the 21st Chairman of the Federal Deposit
Insurance Corporation (FDIC). During this period, the FDIC has undertaken a significant
amount of work with a particular emphasis on three overarching goals:
• Strengthening the banking system as it continues to evolve;
• Ensuring that FDIC-supervised institutions can meet the needs of consumers and
businesses; and
• Fostering technology solutions and encouraging innovation at community banks and the
FDIC.
The FDIC has made significant progress in each of these areas, and I appreciate the
opportunity to share with the Committee how we will continue to move each of them forward.
I. State of the U.S. Banking Industry
Before discussing the FDIC’s work to strengthen the banking system, I would like to
begin by providing context regarding the current state of the industry.
The U.S. banking industry has enjoyed an extended period of positive economic growth.
In July, the economic expansion became the longest on record in the United States. By nearly
every metric – net income, net interest margin, net operating revenue, loan growth, asset quality,
loan loss reserves, capital levels, and the number of “problem banks” – the banking industry is
strong and well-positioned to continue supporting the U.S. economy.
With respect to profitability, banks of all sizes are performing well. In the third quarter
of 2019, the 5,256 FDIC-insured banks and savings institutions reported net income of $57.4
billion.1 Nearly 62 percent of institutions reported annual increases in net income, and only
about 4 percent of institutions were unprofitable. Notably, community banks reported net
income of $6.9 billion, an increase of 7.2 percent from a year earlier. Net interest margin also
remained stable, with an average of 3.35 percent across the industry and a particularly strong
average of 3.69 percent among community banks. Finally, net operating revenue totaled over
$208 billion, an increase of 2.2 percent from a year earlier.
Key balance sheet indicators are similarly robust. Total loan balances increased by 4.6
percent, up from the 4.5 percent growth rate reported the previous quarter. Again, community
banks performed particularly well in this area, with an annual rate of loan growth that was
stronger than the overall industry. Asset quality also remained strong, as the rate of noncurrent
loans (i.e., loans that are 90 days or more past due) declined to 0.92 percent. Finally, the
industry’s capacity to absorb credit losses improved from a year earlier, as the reserve coverage
ratio (i.e., loan-loss reserves relative to total noncurrent loan balances) rose to 131 percent.
1 See FDIC Quarterly Banking Profile, Third Quarter 2019, available at
https://www.fdic.gov/bank/analytical/qbp/2019sep/qbp.pdf. Unless otherwise indicated, all statistics are derived
from this report as of the third quarter of 2019.