ABA’s Nichols: Despite economic headwinds, banks are healthy and prepared

While uncertainty surrounds the U.S. economy at present, America’s banks remain healthy and prepared to support the communities they serve, said American Bankers Association President and CEO Rob Nichols today during an online forum discussing recent economic conditions and longer-term outcomes.

“It’s a challenging moment for the U.S. economy, with inflation running at its highest level in a generation, hitting every American in their wallet. We continue to suffer supply disruptions due to the lingering effects of the pandemic and the Russian aggression in Ukraine,” Nichols said, adding that the Federal Reserve has been working to slow demand by raising interest rates and plans to do so until inflation is under control.

Nichols pointed to the Fed’s recent Financial Stability Report to highlight banks’ resiliency. He noted that banks have maintained risk-based capital ratios well above regulatory minimums, credit quality remains robust and funding risks at domestic banks remain low after the deposits they received during the pandemic. Bank reserves remain above pre-pandemic levels, which Nichols noted is “another sign of the prudent planning and risk management underway as our industry prepares for potential headwinds.”

A significant threat to the financial system right now cited by the Fed report is the growing number of nonbanks looking to offer banking services without being subject to the same regulation as banks. “We have some concerns about that,” Nichols said. “New financial players should have to meet the same rigorous requirements as banks if we want to ensure that consumers and the financial system are protected. Innovation is critical to our competitiveness, but markets are also built and sustained on trust.” Click here to watch the video message from Nichols.

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