Banking system conditions improved in 2021 as banks remain strong

The financial conditions of the banking system remained solid and improved during the first half of 2021, despite lingering concerns, the Federal Reserve (Fed) said in its report. latest monitoring and regulatory report.

According to the Fed, as the economic recovery from Covid-19 continued in the first half of the year, banks saw early signs of loan growth, as well as a drop in delinquencies and abstentions, and an increase in profitability.

Average net interest margins have remained low across the industry, due to persistently low interest rates, although the Fed notes that banks have also seen growth in non-interest income, which helped compensate for the lack of growth in NIM.

At the same time, demand for loans has remained weak overall and, combined with overdue NIMs, has resulted in lower net interest income for banks.

The Fed has flagged cybersecurity and operational resilience as a monitoring priority for large institutions in particular. He said that “Cyber ​​attacks have increased considerably since the start of the COVID event”, especially those who use ransomware.

The report underlined the importance of “cyber hygiene” including IT asset management, vulnerability management and patch management, as well as proactive identification and mitigation of cyber threats.

The Fed also said surveillance activities are starting to revert to pre-pandemic approaches as several pandemic-era flexibilities have been allowed to expire and normal bank reviews resume.

Going forward, the Fed intends to adopt a “hybrid” approach to reviews, which will involve both on-site and off-site reviewers.

Earlier this week, President Joe Biden reappointed Federal Reserve Chairman Jerome Powell for a second term as Federal Reserve Chairman.

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