Tuesday, December 7, 2021

    How the Senate’s $2 trillion coronavirus stimulus package could affect banks

    How the Senate’s $2 trillion coronavirus stimulus package could affect banks

    On Wednesday, the US Senate passed a colossal $2 trillion stimulus bill to protect consumers and businesses from the fallout of the coronavirus pandemic, American Banker reports. The wide-ranging measures would include regulatory changes as well as direct payments to consumers. While the bill has yet to be voted on by the House of Representatives, its details are beginning to come into focus, particularly with regard to how it could benefit US banks.

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    Here are they key elements of the bill aimed at bolstering banks:

    • Looser capital requirements for smaller banks will empower those institutions to better serve businesses in their communities. The bill would lower the requirements that smaller banks have to meet concerning capital reserves that help them stay solvent should they run into trouble, The New York Times reports. Rolling back these requirements will give small banks more power to lend to small- and medium-sized businesses (SMBs), as it will make a larger portion of those banks’ capital reserves available for lending to companies in need. The looser capital reserve requirements will stay in force until the coronavirus crisis has ended, but small banks may push to make the changes permanent, as they have sought this change for some time, pushing for it unsuccessfully late last year.
    • The revival of 2008 financial crisis-era federal protections for banks will encourage consumer trust in the institutions. The bill would authorize the FDIC to reinstate backstop measures enabling the agency to guarantee bank-issued debt and noninterest-bearing transaction deposits (such as consumer checking accounts) beyond its usual $250,000 limit, per American Banker. By enabling the federal government to secure the banking system as well as offer unlimited protection for consumers’ deposits, the stimulus package could bolster consumers’ trust in banks. In times of crisis, it’s important that banks are seen as reliable institutions that have customers’ backs, and increased trust would be welcomed: Only 47% of European and US traditional bank customers completely trust their banks, per Kantar.

    We think that both of these elements of the bill will benefit banks’ relationships with consumers and businesses for the duration of this crisis and beyond it. The government appears to be leaning on banks to come to the aid of customers impacted by the coronavirus pandemic. The regulatory changes included in the stimulus package would make it more possible for banks to do just that. Ultimately, the goodwill generated by assisting customers in their time of need could yield a tangible benefit for banks in the form of long-term loyalty.

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