Building a More Resilient U.S. Banking System

Financial Crisis Bank Resiliency

Following widespread banking failures resulting from the 2008 financial crisis, the Federal Reserve and other regulators began 10 key efforts to make banks more resilient. Explained in our article, How Is Banking Safer Following the Financial Crisis?, the Federal Reserve Bank of San Francisco looks at changes contributing to a safer, sounder United States banking system. Some of the Fed’s stepped-up efforts are mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, while others complement that legislation.

Strengthening the U.S. Banking System

A significant component of strengthening our banking system is making sure the largest banks have mechanisms and resources to withstand most forms of economic and financial stress. For example, any bank with consolidated assets of at least $50 billion must have an official “resolution plan”—a game plan for times of material financial stress or failure.

The biggest banks also go through routine Comprehensive Capital Analysis and Review (CCAR). Also known as a comprehensive stress test, CCAR examines different aspects of a bank’s operations annually. Regulators’ main goal of CCAR reviews is to make sure banks have:

  • Sufficient capital for continued operations
  • Robust forward-looking capital-planning processes
  • Systems and plans that account for their unique risks

Protecting Community Banks

Of course, the Federal Reserve distinguishes big banks whose weakness can shake the entire economy from small banks. Community banks, for example, would face an undue burden by having to meet many of the same regulatory requirements as large banks. So, regulators fashion more basic supervisory expectations for smaller, less complex banks, identifying which provisions of new regulations are relevant.

Visit How Is Banking Safer Following the Financial Crisis? for more detail about all 10 key regulatory efforts building resiliency into the nation’s banks.

Also read What is the Federal Reserve doing to help decrease the likelihood of another financial crisis? for more about how the Fed has stepped up supervision of the entire financial system.

The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.