5 100 lenders and savings institutions of the country have declared a dividend of 32.7 billion dollars for a quarter when they have made profits of $ 18.5 billion, or 70% less than the same period a year earlier, said the FDIC.
“We look at certainly the payments of dividends by the banks and monitor what is happening there “, said the chairperson of the FDIC, Jelena McWilliams, adding that the FDIC had “supervision tools” that it could deploy to ensure that banks do not risk their balance sheets or risk the safety and soundness “with payments to be excessive.
Provisions for loan losses have wiped nearly $ 52.7 billion of industry profits in the first quarter, said the FDIC, against 13.9 billion a year earlier. An 8% increase in loan balances, the most important leap in year-on-year since 2008, has exerted additional pressure on the capital ratios of banks, because the ratios of own funds as a percentage of total assets.
In spite of the timid signs of recovery, including a rebound of 18% in retail sales better than expected in may and the employment data stronger than expected, Ms. McWilliams said that it was too early for regulators to fall against the exceptional measures that they had introduced at the beginning of the crisis. It was notably to allow borrowers to suspend payment of the loans without the banks having to declare that the loans were in difficulty.
The insistence of u.s. banks to pay dividends during the crisis of the sars coronavirus has become a controversial topic, after that the european authorities have put an end to the payments, and that some former american regulators have recommended the United States to do the same.
The federal Reserve will be the green light or block the dividends of the largest banks in the u.s. on the 25th of June, when it will announce the results of their stress tests on an annual basis. Last week, the boss of Morgan Stanley, James Gorman, said that there was no reason for banks like hers who earn more than their dividends are compelled to stop payments.
Ms. McWilliams said on Tuesday that the banking sector had proved to be “a source of strength for the economy” during the pandemic. “The levels of capital and liquidity of banks remain sound, the parameters of asset quality are stable, and the number of” banks of problems “remains close to record lows”, she said.
Banks say the problems are institutions that are likely to fail unless corrective measures are taken. The number of these banks increased from 51 to 54 in the quarter, said the FDIC, marking the first quarterly increase since 2011, when the number had peaked at 888.
Twelve institutions with assets of less than $ 2 billion had fallen below the “requirements of the banks well capitalized” and should take corrective measures, he added.
The FDIC is the agency responsible for making depositors whole in case of bankruptcy of a bank. It may refer to institutions in trouble.
Ms. McWilliams has warned of the challenges ahead. “The federal Reserve lowered the federal funds rate to near zero in march, the environment of low interest rates combined with the economic downturn will present challenges to the industry in the short or medium term,” she said.