Remarks by
FDIC Acting Chairman Martin J. Gruenberg
to the
American Banker Regulatory Symposium;
Washington, D.C.
September 19, 2011
I want to thank Rob Blackwell and the American Banker for inviting me to take part in
this regulatory symposium. The opportunity for an exchange of information and views
provided by an event such as this is extremely valuable.
In my remarks today, I will comment briefly on the condition of the banking system and
then outline some of the FDIC's priorities going forward.
Condition of the Banking Industry
The FDIC and the banking industry are only now emerging from the most severe
financial crisis since the 1930s. The latest data, released by the FDIC in its Quarterly
Banking Profile last month, indicate that banks have continued to make gradual but
steady progress in recovering from the financial market turmoil and severe recession
that unfolded from 2007 through 2009.
The economic recovery, now entering its third year, has been marked by continued
distress in real estate markets and a slow, painful process of balance-sheet repair by
households, financial institutions, small businesses, and, now, governments at all levels.
The result has not only been sub-par growth compared with previous recoveries, but
also a persistent uncertainty about the future prospects for the economy, for jobs, and
for the banking industry.
All of these trends are, of course, of concern to policymakers and to the public. The
FDIC remains alert to these challenges going forward.
There is also positive news in the financial services industry. FDIC data show an overall
improvement in the condition of insured financial institutions in the second quarter.
Industry earnings have grown over the past eight quarters. The percent of noncurrent
loans on the books of FDIC-insured institutions has declined for five consecutive
quarters, reflecting improved credit quality. The growth in the problem bank list declined
in the second quarter for the first time in nearly five years. The Deposit Insurance Fund
returned to positive territory as of June 30. The FDIC is forecasting fewer failing banks
this year than last year.
FDIC-insured institutions are generally well positioned to continue working through this
difficult episode. Industry capital ratios have been restored to record-high levels. This
capital cushion represents not only the wherewithal to absorb additional loan losses, if
needed, but also to back new lending as the demand for credit recovers.
FDIC Acting Chairman Martin J. Gruenberg
to the
American Banker Regulatory Symposium;
Washington, D.C.
September 19, 2011
I want to thank Rob Blackwell and the American Banker for inviting me to take part in
this regulatory symposium. The opportunity for an exchange of information and views
provided by an event such as this is extremely valuable.
In my remarks today, I will comment briefly on the condition of the banking system and
then outline some of the FDIC's priorities going forward.
Condition of the Banking Industry
The FDIC and the banking industry are only now emerging from the most severe
financial crisis since the 1930s. The latest data, released by the FDIC in its Quarterly
Banking Profile last month, indicate that banks have continued to make gradual but
steady progress in recovering from the financial market turmoil and severe recession
that unfolded from 2007 through 2009.
The economic recovery, now entering its third year, has been marked by continued
distress in real estate markets and a slow, painful process of balance-sheet repair by
households, financial institutions, small businesses, and, now, governments at all levels.
The result has not only been sub-par growth compared with previous recoveries, but
also a persistent uncertainty about the future prospects for the economy, for jobs, and
for the banking industry.
All of these trends are, of course, of concern to policymakers and to the public. The
FDIC remains alert to these challenges going forward.
There is also positive news in the financial services industry. FDIC data show an overall
improvement in the condition of insured financial institutions in the second quarter.
Industry earnings have grown over the past eight quarters. The percent of noncurrent
loans on the books of FDIC-insured institutions has declined for five consecutive
quarters, reflecting improved credit quality. The growth in the problem bank list declined
in the second quarter for the first time in nearly five years. The Deposit Insurance Fund
returned to positive territory as of June 30. The FDIC is forecasting fewer failing banks
this year than last year.
FDIC-insured institutions are generally well positioned to continue working through this
difficult episode. Industry capital ratios have been restored to record-high levels. This
capital cushion represents not only the wherewithal to absorb additional loan losses, if
needed, but also to back new lending as the demand for credit recovers.
However, reductions in loan-loss provisions -- the money banks set aside against
expected loan losses -- account for most of the improvement in industry earnings. As
the levels of loan-loss provisions approach their historic norms, the prospects of
earnings improvement from further reductions diminish. Increased lending will be
essential for future revenue growth.
FDIC Priorities
In addition to its basic responsibilities for deposit insurance, bank supervision and bank
resolution, the FDIC has three main priorities going forward that I would like to discuss
today:
the implementation of the FDIC's systemic resolution responsibilities under the
Dodd-Frank Act;
the future of community banks; and
economic inclusion and access to mainstream banking services.
Implementing Systemic Resolution Responsibilities Under the Dodd-Frank Act
The FDIC has been given significant new responsibilities under the Dodd-Frank Act to
resolve systemically important financial institutions (SIFIs). Specifically, these include an
Orderly Liquidation Authority to resolve bank holding companies and non-bank financial
institutions, if necessary, and a requirement for resolution plans that will give regulators
additional tools with which to manage the failure of large, complex enterprises.
The FDIC has taken a number of steps over the past year to carry out these
responsibilities.
First, the FDIC established a new Office of Complex Financial Institutions to carry out
three core functions:
monitor risk within and across these large, complex firms from the standpoint of
resolution;
conduct resolution planning and the development of strategies to respond to
potential crisis situations; and
coordinate with regulators overseas regarding the significant challenges
associated with cross-border resolution.
For the past year, this office has been developing its own resolution plans in order to be
ready to resolve a failing systemic financial company. These internal FDIC resolution
expected loan losses -- account for most of the improvement in industry earnings. As
the levels of loan-loss provisions approach their historic norms, the prospects of
earnings improvement from further reductions diminish. Increased lending will be
essential for future revenue growth.
FDIC Priorities
In addition to its basic responsibilities for deposit insurance, bank supervision and bank
resolution, the FDIC has three main priorities going forward that I would like to discuss
today:
the implementation of the FDIC's systemic resolution responsibilities under the
Dodd-Frank Act;
the future of community banks; and
economic inclusion and access to mainstream banking services.
Implementing Systemic Resolution Responsibilities Under the Dodd-Frank Act
The FDIC has been given significant new responsibilities under the Dodd-Frank Act to
resolve systemically important financial institutions (SIFIs). Specifically, these include an
Orderly Liquidation Authority to resolve bank holding companies and non-bank financial
institutions, if necessary, and a requirement for resolution plans that will give regulators
additional tools with which to manage the failure of large, complex enterprises.
The FDIC has taken a number of steps over the past year to carry out these
responsibilities.
First, the FDIC established a new Office of Complex Financial Institutions to carry out
three core functions:
monitor risk within and across these large, complex firms from the standpoint of
resolution;
conduct resolution planning and the development of strategies to respond to
potential crisis situations; and
coordinate with regulators overseas regarding the significant challenges
associated with cross-border resolution.
For the past year, this office has been developing its own resolution plans in order to be
ready to resolve a failing systemic financial company. These internal FDIC resolution