COVID-19 and the Banking Industry: Risks and Policy Responses

COVID-19 and the Banking Industry: Risks and Policy Responses

COVID-19 and the Banking Industry: Risks and
June 18, 2020
Policy Responses
David W. Perkins,
The Coronavirus Disease 2019 (COVID-19) pandemic has caused widespread economic
Coordinator
disruption. Millions of businesses were forced to shut down and unemployment soared. The
Specialist in
weakened economic conditions are likely to have implications for the financial system, including
Macroeconomic Policy
for banks and the banking industry. Many bank assets are loans to households and businesses,

and banks rely on the inflow of repayments on those loans to make profits and meet their
Raj Gnanarajah
obligations to depositors and creditors. If repayments suddenly decline, banks can become
Analyst in Financial
distressed and potentially fail. Bank failures can be especially disruptive to the economy because
Economics
they remove an important credit source for communities, and the financial system can become

unstable if failures are widespread.
Marc Labonte
Banks can absorb unanticipated losses on loans, to a point, by writing down the value of the
Specialist in
capital. Thus, two key factors in how well banks weather the adverse economic effects of
Macroeconomic Policy

COVID-19 are (1) how concentrated their assets are in loans to households and businesses, and
(2) how much capital they hold to absorb losses. Bank data reported as of December 31, 2019,
Andrew P. Scott
suggest the industry as a whole is relatively well-positioned, compared with recent history, to
Analyst in Financial
endure losses on household and business loans. In general, banks hold high levels of capital,
Economics
largely due to changes in bank regulation and behavior made in response to the 2007-2009

financial crisis. However, certain segments of the industry, such as banks holding high
concentrations of household loans, business loans, or both, are more exposed to losses and have

less capital relative to those exposures than the industry as a whole. For example, household and
business loans make up more than 70% of total assets for 535 banks (roughly, about 1 in 10 banks). These banks, on average,
have less capital buffer relative to the size of those loans than most banks. By one metric, 87 banks are in danger of becoming
seriously distressed.
Policymakers have recognized and responded to the potential economic ramifications of the pandemic. The federal prudential
bank regulators—the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance
Corporation—initially responded using existing authorities. These regulatory measures, which included issuing guidance and
rulemaking, can be placed in two broad categories: (1) helping banks work with tro ubled borrowers and (2) providing
regulatory relief. In addition, the Federal Reserve has taken monetary policy and lender of last resort actions that either
directly or indirectly help banks.
Congress passed several bil s aimed at mitigating the many financial risks of COVID-19—including the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136) and the Paycheck Protection
Program and Health Care Enhancement Act (P.L. 116-139). This legislation included sections aimed at helping the
banking industry withstand the potential financial strain. Various provisions temporarily relaxed certain bank
regulations and accounting rules to give banks more leeway to deal with losses resulting from the pandemic and
temporarily granted broader authorities to regulators to deal with potential instability in the banking industry.
COVID-19 has caused economic disruptions that pose unprecedented and unpredictable challenges for banks. Although
recent regulatory changes aim to reduce the strain the pandemic will put on banks and the banking industry, banks would
nevertheless be impacted if expected payments from affected households and businesses were not made. The banking
industry was in a relatively sound position at the outset of the pandemic; however, if the pandemic’s economic effects prove
to be acute and persistent, banks would be under stress. In addition, certain banks that have especially high concentrations in
loans susceptible to missed payments due to the pandemic’s effects could be vulnerable. Exactly how the effects of the
pandemic will impact the banking industry is uncertain, but it is possible that a number of banks may eventually fail.
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Contents
Introduction ................................................................................................................... 1
How COVID-19 Could Threaten Banks.............................................................................. 2
Bank Loans and Capital Statistics ...................................................................................... 3
Capital ..................................................................................................................... 4
Loans to Households .................................................................................................. 6
Loans to Businesses ................................................................................................... 9
Combined Household and Business Loan Exposures ..................................................... 12
Bank Regulator Responses ............................................................................................. 13
Operational Risk Planning ........................................................................................ 14
Guidance to Help Troubled Borrowers ........................................................................ 14
Ways to Work with Customers.............................................................................. 14
Community Reinvestment Act .............................................................................. 15
Regulatory Relief .................................................................................................... 16
Supervision ....................................................................................................... 16
Capital and Liquidity .......................................................................................... 17
Ownership and Control ....................................................................................... 17
Real Estate Appraisals ......................................................................................... 18
Regulatory Changes Affecting Large Banks............................................................ 18
Reporting Requirements ...................................................................................... 20
Accounting Standards ......................................................................................... 20
Federal Reserve Actions Related to Bank Liquidity....................................................... 20
Lending to Banks ............................................................................................... 21
Policies Increasing Bank Reserves ........................................................................ 22
Congressional Response to Help Banks ............................................................................ 22
Concentration Limits (Section 4011) .......................................................................... 22
Community Bank Leverage Ratio (Section 4012) ......................................................... 22
Troubled Debt Restructuring (Section 4013) ................................................................ 23
Current Expected Credit Loss (Section 4014)............................................................... 23
Guaranteeing Transaction Accounts (Section 4008)....................................................... 24
Mortgage Forbearance (Section 4022 and 4023) ........................................................... 24
Outlook ....................................................................................................................... 25

Figures
Figure 1. Bank Capital Levels, 1991-2019 .......................................................................... 5
Figure 2. Home Loans and Consumer Loans, 1991-2019 ....................................................... 7
Figure 3. Household Debt Noncurrent Rates and Bank Failures, 1991-2019 ............................. 8
Figure 4. C&I and CRE Loans, 1991-2019 ........................................................................ 10
Figure 5. Business Loan Noncurrent Rates and Bank Failures, 1991-2019 ............................. 11

Tables
Table 1. Ratio of Capital to Total Assets, Banks by Asset Size ................................................ 6
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Table 2. Average Household Loan Concentrations and Capital, By Asset Size........................... 8
Table 3. Average Bank Size and Capital, By Household Loan Concentration ............................ 9
Table 4. Average Business Loan Concentrations and Capital, by Asset Size ............................ 11
Table 5. Asset Size and Capital, by Business Loan Concentration ......................................... 12
Table 6. Average Combined Loan Concentrations and Capital, by Asset Size.......................... 12
Table 7. Asset Size and Capital, by Combined Loan Concentration ....................................... 13
Table 8. Banks Fal ing Below 4% Tier I Capital Given 6% Loss, By Concentration................. 13

Contacts
Author Information ....................................................................................................... 26

Congressional Research Service

COVID-19 and the Banking Industry: Risks and Policy Responses

Introduction
The Coronavirus Disease 2019 (COVID-19) pandemic has resulted in mil ions of cases of
infection and more than 100,000 deaths in the United States.1 Shortly after the onset of the
pandemic, it became clear there would be widespread economic effects due to il nesses,
quarantines, state and local stay-at-home orders, and other business disruptions.2 By May 2020,
about 21.5 mil ion fewer Americans were employed than in February 2020, and the U.S.
unemployment rate had risen from 3.5% to 13.3%.3 One business group projected that 7.5 mil ion
smal businesses could close permanently.4 Consequently, many Americans may lose their main
income sources.5 How the economic situation wil develop is difficult to project, due in part to
uncertainty about how long the pandemic wil continue. Even after businesses reopen, many
people may choose to continue to curtail nonessential activities for some time to reduce the
likelihood that they catch and spread COVID-19.6
Congress passed several bil s in an effort to, among other goals, at least partly ameliorate the
adverse economic effects of the virus. Legislation includes the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act; P.L. 116-136) and the Paycheck Protection Program and
Health Care Enhancement Act (P.L. 116-139).7
The deterioration of economic conditions has implications for the financial system, including for
banks and the banking industry.8 Many bank assets are made up of loans to households and
businesses, and banks rely on the inflow of repayments from those loans to make profits and meet
their obligations to depositors and creditors. Even though banks take certain measures to protect
themselves against losses, if repayments suddenly decline as a result of widespread
unemployment and business closures, banks can become distressed and potential y fail.9 Bank

1 Centers for Disease Control and Prevention, Coronavirus Disease 2019, “Cases in the U.S.,” June 16, 2020, at
https://www.cdc.gov/coronavirus/2019-ncov/cases-updates/cases-in-us.html.
For background on Coronavirus Disease 2019 (COVID-19), see CRS In Focus IF11421, COVID-19: Global
Im plications and Responses, by Sara M. T harakan et al.
2 For background on the potential economic effects of the coronavirus in the United States, see CRS Insight IN11235,
COVID-19: Potential Econom ic Effects, by Marc Labonte.
3 Federal Reserve Bank of St. Louis, Economic Data, “Employment Level, seasonally adjusted,” at
https://fred.stlouisfed.org/series/CE16OV; and Federal Reserve Bank of St. Louis, Econom ic Data, “ Unemplyment
rate, seasonally adjusted,” at https://fred.stlouisfed.org/series/UNRAT E.
4 Matthew Wagner and Michael Powe, “T he Impact of COVID-19 on Small Businesses: Follow-up Survey Report,”
Main Street America, May 26, 2020, at https://www.mainstreet.org/blogs/national-main-street-center/2020/05/26/the-
impact -of-covid-19-on-small-businesses-follow.
5 For more information on financial industry policy issues during the COVID-19 outbreak for consumers having trouble
paying their bills, see CRS Insight IN11244, COVID-19: The Financial Industry and Consum ers Struggling to Pay
Bills, by Cheryl R. Cooper.
6 Lydia Saad, Americans Hesitant to Return to Normal in Short Term , Gallup, April 1, 2020, at
https://news.gallup.com/poll/306053/americans-hesitant-return-normal-short-term.aspx.
7 CRS products on COVID-19 are available at https://www.crs.gov/resources/coronavirus-disease-2019.
8 In general, this report examines Federal Deposit Insurance Corporation (FDIC)-insured depository institutions, which
include commercial banks and savings associations. When the report examines regulations applicable to the parent
bank holding companies that own insured depositories, it is noted. Credit unions are similar to banks in a number of
ways and may face similar issues and challenges, but they are not the subject of this report.
9 Certain provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136) and
regulator responses taken under existing authorities aim to enable and encourage banks to grant loan forbearances or
other loan modifications; this does not undo the fact that payments were missed and banks could bear losses. For more
information, see CRS Report R46356, COVID 19: Consum er Loan Forbearance and Other Relief Options, coordinated
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failures can be especial y disruptive to the economy because they remove an important credit
source for communities. Widespread failures could create instability in the financial system.
This report examines how the economic ramifications of the coronavirus pandemic could affect
banks and the banking industry. It begins by describing how unexpected missed loan payments
affect banks’ conditions and how missed payments, when they occur in sufficiently large
amounts, can lead to bank failures. It then looks at bank balance-sheet data as of December 31,
2019, to assess the exposure of banks to losses from missed payments on different types of loans
before the onset of the pandemic.10 The report also examines how the responses of the federal
bank regulators—the Federal Reserve (Fed), the Office of the Comptroller of the Currency
(OCC), and the Federal Deposit Insurance Corporation (FDIC)—and legislation passed by
Congress could help mitigate the pandemic’s impact on banks. The report concludes with a brief
outlook for the banking industry.
How COVID-19 Could Threaten Banks
A bank gets income from the repayments with interest it receives on its assets and fees it charges
its customers. A bank charges fees on various types of customer transactions, and it earns interest
income mainly on two types of assets: loans and investment securities. Banks get funding to make
loans and buy securities by accepting deposits, issuing debt (such as bonds), and raising capital
(such as by issuing stocks or retaining profits earned over time). Deposits and debt are liabilities
that place a degree of inflexible repayment obligations on banks, whereas a bank has a significant
degree of freedom to determine dividend payments on stocks or stock repurchases. The flexibility
a bank has over how it manages its capital, including write-down of retained earnings, al ows a
bank to absorb anticipated losses on assets, to a point, without failing.
As a consequence of the COVID-19 pandemic, some banks might face potential losses that could
affect their capital levels and possibly lead to failure. Because of the way regulation requires
banks to account for losses, there is a delay before missed payments lead to reductions in loan
value and eventual capital write-downs and bank failures. In addition, the effects of missed
payments during the pandemic may take longer to appear on bank balance sheets. Normal y, if
there are no payments on a loan for over 90 days, it is considered a nonperforming loan, and the
banks are required to take an appropriate write-down on the value of the loan. However, Congress
and the federal bank regulators have either required or encouraged banks to al ow their customers
to delay payments on loans issued by the banks (as wel as to grant their customers leniency on
certain types of fees), and regulators have given the banks a temporary reprieve on taking certain
write-downs for certain loans. These measures are covered in the “Bank Regulator Responses”
section, below.
In the short term, the effects of the pandemic wil likely first be seen on banks’ income
statements. Banks account for expected losses by making an adjustment on their balance sheets
and income through loss reserves (see text box). When banks determine that losses on loans wil

by Cheryl R. Cooper.
10 Banks report income and balance-sheet data as of the end of the financial quarter—March 31, June 30, September 30,
and December 31. T he World Health Organization (WHO) declared the COVID-19 outbreak a pandemic on March 11,
2020, and President T rump declared a state of emergency on March 13. T hus, December 31, 2019, data are presented in
the report as reflecting bank industry conditions before the outbreak had significant effects. March 31, 2020, data are
available, but they may reflect changing conditions and initial bank responses to the COVID-19 outbreak in the first
weeks of pandemic. March 31, 2020, data are briefly referenced but because this report aims to present conditions
before the onset of the pandemic, the focus is on December 31, 2019 data.
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be greater than previously estimated, they
Loss Reserves
increase their loss reserves and make a
necessary reduction to their recorded earnings.
Credit Loss Reserves12 (or loss reserves) potential y
indicate the expected size of losses in the aftermath of
Bank industry data as of the end of the first
economic downturns and disruptions, such as the
quarter indicate that banks have begun making
Coronavirus Disease 2019 (COVID-19) pandemic, that
these adjustments. Industry loss reserves
policymakers could monitor in upcoming quarters. Loss
increased almost $73 bil ion dollars, or about
reserves are a bank balance-sheet item intended to
59%, from the end of the fourth quarter 2019
capture future losses that are expected to occur when
some portion of borrowers do not repay. Loss
to the end of the first quarter 2020 (although a
reserves provide a cushion against future losses, and
portion of that change was the result of certain
the amount of loss reserves is usual y determined every
banks switching to a different accounting
quarter. Estimating the uncol ectible amounts used to
standard, cal ed Current Expected Credit
reduce the book value of loans involves a degree of
judgment by bank management. To increase the loss
Losses, or CECL, described in footnote 14).
reserves on the balance sheet, banks make an
Meanwhile, quarterly net income fel to $18.5
adjustment by reducing earnings for the most recent
bil ion in the first quarter 2020 from $54.9
earning period. If current period earnings are not
bil ion in fourth quarter 2019, a 66% decline.11
sufficient, then banks reduce retained earnings—which
are part of bank capital.
Over the long term, if current economic
conditions persist and borrowers are not able to repay their loans, the banks—without additional
reprieve from the financial regulators—would need to fully recognize the losses on the loans and
write down the value of capital. This scenario wil likely take some time to play out, and the full
effects and any related bank failures wil likely not be known at least for a few more financial
quarters. For example, during the 2007-2009 financial crisis, the number of bank failures reached
the highest level a couple of years after the height of the crisis, peaking in 2010 with 157 bank
failures.13 However, because the COVID-19-related financial conditions have different causes
than the 2007-2009 financial crisis, it is difficult to predict how the current conditions could
affect the number of bank failures and in what time frame.
Banks that incur losses but avoid failure might take time to rebuild capital reserves post-COVID-
19, as some banks would have to rely on future earnings and recovery of their investment
portfolios. Banks can issue additional stock to rebuild capital, but, at times of economic distress, a
successful stock offering might be chal enging. Thus, the process of rebuilding capital could
temporarily dampen future lending.
Bank Loans and Capital Statistics
Losses on bank loans due to COVID-19 could occur through two broad mechanisms: (1) as many
people become unemployed, households may miss payments on their mortgages and consumer
loans, and (2) as many businesses close, temporarily or perhaps permanently, they may miss

11 FDIC, “Quarterly Banking Profile,” first quarter 2020, at https://www.fdic.gov/bank/analytical/qbp/qbpmenu.html.
12 Current Expected Credit Loss (CECL) is the new standard to determine the allowance for credit losses. As a
consequence of the COVID-19 pandemic, Congress passed a temporary delay as part of the CARES Act. T he CECL
model considers past events, current conditions, and reasonable and supportable fore casts (forward-looking) that are
relevant for assessing the collectability of the cash flows owed on the financial asset. CECL is a single measurement
objective that is to be applied to all applicable financial assets. Board of Governors of the Federal Reserve System
(Federal Reserve), FDIC, National Credit Union Administration (NCUA), Office of the Comptroller of the Currency
(OCC), “Joint Statement on the New Accounting Standards on Financial Instruments - Credit Losses,” press release,
June 17, 2016, pp. 1-2, at https://www.federalreserve.gov/newsevents/pressreleases/bcreg20160617b.htm.
13 FDIC, Failed Bank List, 2020, at https://www.fdic.gov/bank/individual/failed/banklist.html.
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COVID-19 and the Banking Industry: Risks and Policy Responses

payments on business loans. Banks can survive these losses if they have sufficient capital. This
section of the report presents statistics on bank capital and exposure to loans to households and
businesses, as of December 31, 2019.14
This report focuses on household and business loans because of (1) their importance to banks and
the economy and (2) the direct and immediate effect of the pandemic on borrower repayment
ability. Banks hold other types of loans and assets, such as loans secured by farmland and loans to
municipalities, which also might be sources of potential loss as the pandemic’s effects unfold. As
the economic situation develops, this report may be updated to examine additional coronavirus-
related risks to banks.
Capital
Capital gives banks the ability to withstand losses, to a point, without failing and regardless of
what asset classes incur losses. The amount of capital banks hold relative to their assets wil play
a central role in how wel they weather the financial effects of the coronavirus. On its own,
overal capital il ustrates only how large losses can be until capital is completely exhausted, but
banks also face regulatory capital requirements, so it is also informative to examine how much
capital banks hold over regulatory minimums.
Regulators require banks to hold certain amounts of different categories of capital relative to
assets.15 These requirements are expressed as ratios. Banks that fal below certain levels face a
variety of consequences, such as restrictions on dividend payments to shareholders or on asset
growth. If a bank’s capital problems are not repaired, it can be shut down and resolved by the
FDIC. Thus, a bank becomes seriously impaired at the point that it fal s below minimums, not
when its capital reaches zero.
Banks face numerous different types of capital requirements, some of which involve calculations
cal ed risk-weighting and al of which involve some opportunities to make accounting
adjustments. For simplicity and brevity, this report uses a proxy capital measurement to estimate
how current bank capital compares with minimums: a ratio of Tier 1 capital—a regulatory
category of capital, which includes common stock, retained earnings, and certain preferred
stock—to total assets. This ratio is similar to, but not precisely the same as, two official
regulatory ratios: the Tier 1 leverage ratio and the Community Bank Leverage Ratio.16 The
difference between the simple Tier 1 capital to asset ratio and the Tier 1 leverage ratio is general y

14 T his section analyzes data from the quarterly report on condition and income filed by FDIC-insured depository
institutions, known as the “ call report.” T hese data do not include information about the parent bank holding companies
that may own these depositories.
T his report uses December 31, 2020 data to assess the state of the banking industry at the onset of the pandemic. March
31, 2020 (a date several weeks after the onset of the pandemic) data were available at publication, but CRS analysis
found indications that banks had started to experience certain pandemic effects and accordingly made initial
adjustments to their balance sheets and income accounting by that date. However, the variables of interest presented
here to access the banking industry’s longer-term health and risk exposure, including household and business loan
concentrations and T ier 1 capital levels, had not meaningfully changed in the first quarter .
15 For a more detailed examination of bank capital requirements, see CRS In Focus IF10809, Introduction to Bank
Regulation: Leverage and Capital Ratio Requirem ents, by David W. Perkins; and CRS Report R44573, Overview of
the Prudential Regulatory Fram ework for U.S. Banks: Basel III and the Dodd -Frank Act, by Darryl E. Getter.
16 T he differences between this report’s proxy capital measurement and the two official ratios result mainly from the
deductions that banks are allowed to make from their total asset value before calculating the official ratios. In general,
the differences are relatively small; however, the bank regulatory ratios are slightly higher than the capital ratio
presented in this report.
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smal , so this report uses the general y applicable regulatory leverage ratio minimum of 4% as a
benchmark number when estimating how much capital over regulatory minimums banks hold.
As of December 31, 2019, the banking industry held more than $18.6 tril ion in total assets and
more than $1.7 tril ion in capital, an amount equal to about 9.3% of total assets. If 4% of total
assets is used to approximate how much capital the industry needs to hold to meet regulatory
minimums, the industry must hold a minimum of $746 bil ion in Tier 1 capital. This means that at
the end of 2019, the industry had a buffer of about $991 bil ion. This level of capitalization is
high relative to recent history, as shown in Figure 1, and indicates that banks are general y wel
above regulatory minimum requirements. For example, at the end of 2007, the industry held 7.6%
of total assets in capital and had a buffer of about $458 bil ion. The relatively high level of
capitalization in 2019 was largely due to stringent capital requirements implemented by bank
regulators in response to the 2007-2009 financial crisis and changes in bank behavior due to
lessons learned from that crisis. By this measure, banks had become more resilient (i.e., they can
absorb more future losses than in the past) as they face the current downturn.
Figure 1. Bank Capital Levels, 1991-2019

Source: Congressional Research Service (CRS) calculations based on Federal Deposit Insurance Corporation
(FDIC), “Quarterly Banking Profile,” fourth quarter 2019 data.
The industry-wide numbers are skewed by a smal number of extremely large banks. Thus, it is
important to examine banks of different sizes to see how different market segments compare with
each other in terms of capitalization or exposure to different asset classes. Table 1 presents
average capital levels for banks of different asset sizes. It shows that, on average, smal er banks
were better capitalized than large banks.
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Table 1. Ratio of Capital to Total Assets, Banks by Asset Size
as of December 31, 2019

Count
T1 Capital/Total Assets
Al Banks
5,227
12.9%
Over $250 bn
10
8.3%
$100-$250 bn
19
9.8%
$10-$100 bn
111
9.9%
$1-$10 bn
659
10.9%
Less than $1 bn
4,428
13.2%
Source: CRS calculations based on Federal Financial Institution Examination Council (FFIEC) bank cal report
data for December 31, 2019.
Loans to Households
A significant portion of a typical bank’s assets consists of loans to households, which households
use to purchase houses, cars, and other consumer goods. This report examines loans in two broad
categories:
 loans secured by a home, such as mortgages and home equity lines of credit
(home loans); and
 loans used to make consumer purchases (consumer loans). These can be secured
(e.g., auto loans) or unsecured (e.g., credit cards).
Home loans and consumer loans can be pooled into groups and sold to investors or other banks
though a process cal ed securitization. Many banks own a significant amount of mortgage-backed
securities (MBS), almost al of which are backed directly or indirectly by the federal government
through government-sponsored enterprises, such as Fannie Mae or Freddie Mac. Arguably, banks
are also exposed to losses on these MBS. However, due to the government backing, they are not
exposed to default risk, so are not covered in this report.17
U.S. banks hold more than $2.5 tril ion in home loans and more than $1.8 tril ion in consumer
loans, equaling 13.6% and 9.9% of total assets, respectively (see Figure 2).18 Compared with
recent history, these percentages represent a relatively low exposure to home loans and a typical
exposure to consumer loans. Along with the relatively high capitalization level discussed in the
“Capital” section, these conditions suggest the banking industry is comparatively well-positioned
to withstand losses on household debt.

17 For more information on the federal government’s role in the housing finance system, see CRS Report R42995, An
Overview of the Housing Finance System in th e United States, by N. Eric Weiss and Katie Jones.
18 FDIC, “Quarterly Banking Profile,” fourth quarter 2019, at https://www.fdic.gov/bank/analytical/qbp/.
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Figure 2. Home Loans and Consumer Loans, 1991-2019
as percent of total assets

Sources: CRS calculations based on FDIC, “Quarterly Banking Profile,” fourth quarter 2019 data.
To il ustrate how missed payments on home and consumer loans can put banks under stress,
Figure 3 presents these loans’ noncurrent rates (the percentage of loans for which payment is at
least 30 days past due) between 1991 and 2019. During and after the 2007-2009 financial crisis,
the noncurrent rates on household loans greatly increased:
 Home loan noncurrent rates increased from 0.9% in 2006 to 7.8% in 2012. The
noncurrent rate at the end of 2019 was 1.8%.
 Consumer loan noncurrent rates increased from 1.0% in 2006 to 2.2% in 2009.
The noncurrent rate at the end of 2019 was 1.0%.19
Subsequent to the dramatic rise in noncurrent rates, bank failures rose from 0 in 2006 to a peak of
157 in 2010. Between 2008 and 2014, there were 507 bank failures.20 Defaults on household debt
were not solely responsible for these failures. Banks fail for numerous reasons. For example, the
high number of failures in the early 1990s were largely the result of the savings and loan crisis,
which occurred for numerous reasons (including high and volatile interest rates and adverse
regional economic conditions in the 1980s). Nevertheless, the correlation is il ustrative of the
stress placed on banks by missed household payments.

19 FDIC, “Quarterly Banking Profile,” fourth quarter 2019.
20 FDIC, “Bank Failures In Brief – Summary 2001 through 2020,” at https://www.fdic.gov/bank/historical/bank/.
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Figure 3. Household Debt Noncurrent Rates and Bank Failures, 1991-2019

Sources: FDIC “Quarterly Banking Profile,” fourth quarter 2019; and FDIC, “Bank Failures In Brief.”
Note: Al rate and failure numbers are year-end.
Table 2 groups banks based on asset size. In general, smal er banks are more exposed to home
loans than large banks, but smal er banks are less exposed to consumer loans and are better
capitalized. As of December 31, 2019, the combined home and consumer exposure result in an
exposure to household debt that is general y similar across size groups (i.e., roughly 20% to
25%).21
Table 2. Average Household Loan Concentrations and Capital, By Asset Size
Home Loans/
Consumer Loans/
Total HH Loans/
T1 Capital/

Count
Total Assets
Total Assets
Total Assets
Total Assets
Al Banks
5,227
19.4%
3.4%
22.8%
12.9%
Over $250 bn
10
11.1%
10.4%
21.5%
8.3%
$100-$250 bn
19
11.6%
18.2%
29.8%
9.8%
$10-$100 bn
111
17.3%
8.4%
25.7%
9.9%
$1-$10 bn
659
18.3%
3.6%
21.9%
10.9%
Less than $1 bn
4,428
19.7%
3.1%
22.8%
13.2%

21 CRS calculations based on Federal Financial Institution Examination Council (FFIEC) bank call report data for
December 31, 2019.
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Source: CRS calculations based on FFIEC bank cal report data for December 31, 2019.
Notes: HH = Household; T1 = Tier 1. Averages are individual institution means, not weighted by asset size.
Banks differ across business models as wel . Whereas some banks choose not to concentrate in
any one asset type, other banks choose to specialize to serve a particular market or credit need.
For example, a typical bank might have 20% to 25% of assets as household debt, but another,
more specialized bank may have twice that exposure or more. As Table 3 shows, 340 banks have
concentrations of between 40% and 50%, and 383 banks have over 50%. These banks are, on
average, smal er banks. The 40% to 50% group holds less capital than average, although they stil
have a high ratio compared with large banks presented above. The over 50% group holds a high
level of capital, but some have exposures wel above the 50% threshold, as evidenced by the
average concentration of 62.5%.
Table 3. Average Bank Size and Capital, By Household Loan Concentration
dol ar amounts in mil ions
Household Loans/
Household Loans/
T1 Capital/
Total Assets
Count
Total Assets
Total Assets
Total Assets
<40%
4,504
$3,788
17.8%
12.9%
40-50%
340
$1,844
44.7%
12.1%
>50%
383
$2,526
62.5%
13.4%
Source: CRS calculations based on FFIEC bank cal report data for December 31, 2019.
Note: Averages are individual institution means, not weighted by asset size.
Loans to Businesses
A significant portion of a typical bank’s assets consists of loans to businesses, which individuals
or companies use to start or expand an enterprise, purchase commercial real estate or equipment,
or pay wages to support ongoing operations. Business loans can be divided into two broad
categories:
 Commercial real estate (CRE) loans are secured by the land and building in
which the business operates, such as a smal -town shop or restaurant, a
commercial office park, a factory, or a skyscraper. These may be owner occupied
(the owner operates the business) or nonowner occupied (the business pays rent
to the owner).
 Commercial and industrial (C&I) loans are unsecured or secured by col ateral
other than real estate, such as equipment.
In al these cases, loan repayment depends on a sufficient inflow of cash to the underlying
businesses.
U.S. banks hold more than $1.9 tril ion in C&I loans and more than $1.5 tril ion in CRE loans,
equaling 10.3% and 8.1% of total assets, respectively (see Figure 4). The C&I loans-to-total-asset
ratio has grown steadily since the post-financial crisis low in 2010; although compared with
recent history, the current ratio is about an average C&I exposure. CRE exposures represent a
slightly higher-than-average exposure compared with recent history. These conditions suggest the
banking industry as a whole may have average to slightly higher-than-average exposure to
business loan losses; although with the current high levels of capitalization, they may be wel -
positioned to withstand losses.
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Figure 4. C&I and CRE Loans, 1991-2019
as percent of total assets

Source: Congressional Research Service (CRS) calculations based on FDIC, “Quarterly Banking Profile,” fourth
quarter 2019 data.
During and after the 2007-2009 financial crisis, the noncurrent rates for business loans greatly
increased, as shown in Figure 5:
 C&I loan noncurrent rates increased from 0.7% in 2006 to 3.1% in 2009. The
noncurrent rate at the end of 2019 was 0.8%.
 CRE loan noncurrent rates increased from 0.6% in 2006 to 4.3% in 2010. The
noncurrent rate at the end of 2019 was 0.5%.
Banks failed for numerous reasons, and defaults on business debt were not solely responsible for
the post-crisis failures. The correlation between business loan missed payments and bank failures
is nevertheless il ustrative.
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Figure 5. Business Loan Noncurrent Rates and Bank Failures, 1991-2019

Sources: FDIC, “Quarterly Banking Profile,” fourth quarter 2019; and FDIC, “Bank Failures In Brief.”
Notes: Al rate and failure numbers are year-end.
Banks’ business loan concentrations also differ across size groups. Table 4 groups banks based on
asset size. In general, smal er banks—especial y banks with $1 bil ion to $10 bil ion in assets—
are more exposed to business loans than large banks. In terms of the two types of business loans,
smal er banks are less exposed to C&I loans but more exposed to CRE loans, and the CRE loan
disparity is large enough to result in the greater overal business loan exposure. Whereas the
average large bank has less than 20% of assets in business loans, the smal er banks have 23% to
33% in business loans. Smal er banks are better capitalized, so although they may face greater
losses on business loans, they may be better situated to absorb the losses.
Table 4. Average Business Loan Concentrations and Capital, by Asset Size
C&I Loans/
CRE Loans/
Business Loans/
T1 Capital/

Count
Total Assets
Total Assets
Total Assets
Total Assets
Al Banks
5,227
8.2%
16.3%
24.5%
12.9%
Over $250 bn
10
10.7%
4.5%
15.1%
8.3%
$100-$250 bn
19
13.9%
4.8%
18.8%
9.8%
$10-$100 bn
111
11.4%
16.6%
28.1%
9.9%
$1-$10 bn
659
10.8%
22.5%
33.3%
10.9%
Less than $1 bn
4,428
7.7%
15.4%
23.1%
13.2%
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Source: CRS calculations based on FFIEC bank cal report data for December 31, 2019.
Note: Averages are individual institution means, not weighted by asset size.
As Table 5 shows, 515 banks had business loan concentrations of between 40% to 50%, and 349
banks are over 50%. These banks are smal er than average—particularly the most heavily
concentrated group—and hold less capital than banks not concentrated in business loans, but they
stil have a higher ratio compared with large bank ratios displayed in Table 4 above.
Table 5. Asset Size and Capital, by Business Loan Concentration
dol ar amounts in mil ions
Business Loans/
Business Loans/
T1 Capital/
Total Assets
Count
Total Assets
Total Assets
Total Assets
<40%
4,363
$3,948
19.4%
13.5%
40-50%
515
$2,094
44.3%
11.1%
>50%
349
$1,009
58.2%
11.8%
Source: CRS calculations based on FFIEC bank cal report data for December 31, 2019.
Notes: Averages are individual institution means, not weighted by asset size.
Combined Household and Business Loan Exposures
In total, banks held nearly $8.1 tril ion worth of household and business loans, which accounts for
over 43% of their total assets. This is slightly less than the 1991-to-2019 average of 45% and wel
below the two-decade high of 51% reached in 2000.
On average, mid-size banks with assets between $1 bil ion and $10 bil ion have the highest
concentration in household and business loans, followed closely by $10 bil ion to $100 bil ion
banks, as shown in Table 6. The 10 banks with over $250 bil ion in assets have the lowest
concentration in these loans.
Table 6. Average Combined Loan Concentrations and Capital, by Asset Size
Household and Business Loans/
Tier 1 Capital/

Count
Total Assets
Total Assets
Al Banks
5,227
47.3%
12.9%
Over $250 bn
10
36.7%
8.3%
$100-$250 bn
19
48.6%
9.8%
$10-$100 bn
111
53.8%
9.9%
$1-$10 bn
659
55.3%
10.9%
Less than $1 bn
4,428
45.9%
13.2%
Source: CRS calculations based on FFIEC bank cal report data for December 31, 2019.
Note: Averages are individual institution means, not weighted by asset size.
When the household loan and business loan categories are combined, the data indicate that many
banks are heavily concentrated and could become vulnerable if the economic effects of the
COVID-19 pandemic cause missed payments across both categories—in other words, if the
pandemic causes widespread and lasting economic damage. As shown in Table 7, there are 535
banks whose assets are made up of more than 70% household and business loans. These banks
tend to be smal er than less concentrated banks and are relatively less capitalized.
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Table 7. Asset Size and Capital, by Combined Loan Concentration
dol ar amounts in mil ions
Combined Loans/
Combined Loans/
Tier 1 Capital/
Total Assets
Count
Total Assets
Total Assets
Total Assets
<50%
2,644
$4,565
32.1%
15.7%
50-70%
2,048
$2,624
59.4%
11.5%
>70%
535
$2,261
75.8%
11.4%
Source: CRS calculations based on FFIEC bank cal report data for December 31, 2019.
Note: Averages are individual institution means, not weighted by asset size.
According to one measure,22 banks’ loss rate on total loans in the two years following the 2007-
2009 financial crisis was nearly 6%. An estimate of how many banks could fal below a 4% Tier 1
capital-to-total asset ratio if this loss rate occurs on household and business loans is presented in
Table 8.
By this metric, 87 banks are in danger of becoming seriously distressed, which some may view as
an encouraging number relative to the over 500 banks that failed in the aftermath of the last
financial crisis; the number reflects how much better capitalized banks are now relative to then.
Any hypothetical loss rate is bound to involve a degree of uncertainty given the uncertainty
involved in the pandemic’s economic effects, and a number of caveats should be kept in mind
when examining this estimate. As previously discussed, the last crisis had certain key differences
from the pandemic-related crisis. In addition, the 6% was an average across al bank loans; some
loan categories experienced higher loss rates than others, which wil likely be the case following
the pandemic. Furthermore, this estimate assumes no losses on other categories of loans, such as
farm loans and loans to municipalities. If losses were experienced across a broader class of loans
than household and business loans, more banks could fal below the 4% level.
Table 8. Banks Falling Below 4% Tier I Capital Given 6% Loss, By Concentration
Combined Loans/
Total Assets
Count
6% Loss > Tier 1 Buffer
<50%
2,640
10
50-70%
2,046
31
>70%
535
46
Source: CRS calculations based on FFIEC bank cal report data for December 31, 2019.
Note: Four banks in the less than 50% group and two banks in the 50%-70% group are not included because
they are already below 4% level.
Bank Regulator Responses
Bank regulators have taken three general approaches to managing issues stemming from COVID-
19:
1. ensuring banks have sufficient means to address operational risks;

22 T his loss rate was calculated by dividing the cumulative net charge-offs (the amount of loans banks recognize as
uncollectable minus the amount they recover from those loans) from the fourth quarter of 2008 through the fourth
quarter 2010 by average total loans during this period.
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2. encouraging consumers to work with customers who are affected by the
pandemic; and
3. adjusting regulations and regulatory requirements to ensure financial institutions
can continue lending during the pandemic.
Unless otherwise noted, these regulatory changes were joint rulemakings or guidance involving
multiple banking regulators. Bank regulators have also issued regulations and guidance to
implement provisions of the CARES Act, which are discussed in the “Congressional Response to
Help Banks” section. In addition, the Fed has made regulatory changes aimed at addressing bank
liquidity, which are discussed in the “Federal Reserve Actions Related to Bank Liquidity” section.
Operational Risk Planning
Regulators’ efforts to deal with the potential effects of COVID-19 began in early March 2020,
with attempts to ensure that depository institutions were adequately planning for the potential
risks. The initial framework for these efforts built upon existing guidance aimed at ensuring banks
had sufficient means to address operational risks stemming from an influenza pandemic.23 The
guidance identifies business continuity plans as a key tool to address pandemics and provides a
comprehensive framework to ensure the continuation of critical operations.
Pandemic planning is different from other types of business continuity plans in a few ways. For
instance, natural disasters and malicious activity are often specific to a particular geographic
region or facility (i.e., those occurrences are limited in scope and duration). The effects of a
pandemic are more difficult to plan for, as they can occur global y and in multiple waves. The
regulators initial y set out to ensure that financial institutions had adequate plans to continue
operations during a global pandemic, which is the case with COVID-19.
Guidance to Help Troubled Borrowers
Once it was clear that COVID-19 was a global pandemic with far-reaching economic impacts,
regulators shifted focus to providing guidance on how to address and serve affected customers.24
Ways to Work with Customers
In early March 2020, banking regulators began encouraging financial institutions to work with
customers in COVID-19-affected areas.25 Throughout March, the regulators began clarifying the
ways they wanted financial institutions to address consumer concerns and began providing more
incentives for doing so. For example, regulators announced that any “prudent efforts to modify
terms of existing loans for affected customers would not be subject to supervisory criticism”—in

23 On March 6, 2020, the FFIEC updated its influenza pandemic guidance to minimize the potentially adverse effects of
COVID-19. See FFIEC, “ Interagency Statement on Pandemic Planning,” March 6, 2020, at
https://www.ffiec.gov/press/PDF/FFIEC%20Statement%20on%20Pandemic%20Planning.pdf .
24 For more on policy options for financial services companies responding to customers affected by COVID-19, see
CRS Insight IN11244, COVID-19: The Financial Industry and Consum ers Struggling to Pay Bills, by Cheryl R.
Cooper.
25 Each of the regulators typically issues its own press release when there are joint agency statements. For example, see
OCC, “Agencies Encourage Financial Institutions to Meet Financial Needs of Customers and Members Affected by
Coronavirus,” press release March 9, 2020, at https://www.occ.gov/news-issuances/news-releases/2020/nr-ia-2020-
30.html.
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other words, efforts to help customers would not face the type of safety and soundness concerns
that might otherwise be raised in bank examinations in normal times.26
Some of the ways regulators suggest that institutions help customers include the following:
Waiving certain fees, such as:
Automated teller machine (ATM) fees for customers and non-customers,
Overdraft fees,
Late payment fees on credit cards and other loans, and
Early withdrawal penalties on time deposits;
Increasing ATM daily cash withdrawal limits;
Easing restrictions on cashing out-of-state and non-customer checks;
Increasing credit card limits for creditworthy borrowers;
Offering payment accommodations, such as allowing borrowers to defer or skip some
payments or extending the payment due d ate, which would avoid delinquencies and
negative credit bureau reporting; and
Working with consumers who are temporarily unable to work due to temporary business
closures, slowdowns, or sickness.27
Additional y, the federal regulators began encouraging financial institutions to offer smal -dollar
loans to consumers and businesses affected by COVID-19 to help meet customers’ needs due to
shortages in cash, unexpected expenses, or income disruptions.28
These initiatives reflect the regulators’ views that efforts to help customers “serve the long-term
interests of communities and the financial system when conducted with appropriate management
oversight and are consistent with safe and sound banking practices and applicable laws, including
consumer protection laws.”29
Community Reinvestment Act
Another consequence of the far-reaching economic impact of COVID-19 is its effect on low- and
moderate-income (LMI) areas. Building off their guidance to ensure financial institutions are able
to continue working with customers, regulators began providing new incentives for institutions to
help LMI customers. The Community Reinvestment Act (CRA; P.L. 95-128) was enacted to
increase the likelihood that banks would sufficiently address the credit needs of LMI
neighborhoods. Because banks may accept deposits from al individuals in a community, the CRA
establishes a reciprocal obligation to meet the credit needs, as much as possible, of their

26 For instance, see FDIC, “Regulatory Relief: Working with Customers Affected by Coronavirus,” March 13, 2020, at
https://www.fdic.gov/news/news/financial/2020/fil20017.pdf (hereinafter FDIC, “ Regulatory Relief: Customers
Affected by Coronavirus”).
27 FDIC, “Regulatory Relief: Customers Affected by Coronavirus.”
28 Federal Reserve, Consumer Financial Protection Bureau (CFPB), FDIC, NCUA, and OCC, “Joint Press Release:
Federal agencies encourage banks, savings associations and credit unions to offer responsible small-dollar loans to
consumers and small businesses affected by COVID-19,” press release, March 26, 2020, at
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200326a.htm.
29 FDIC, “FDIC Statement on Financial Institutions Working with Customers Affected by the Coronavirus and
Regulators and Supervisory Assistance,” March 13, 2020, at
https://www.fdic.gov/news/news/financial/2020/fil20017a.pdf .
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COVID-19 and the Banking Industry: Risks and Policy Responses

communities at large.30 Banking institutions can often receive CRA credits for meeting customer
cash and financial needs during major disasters in adversely affected communities, even in those
where the bank does not primarily accept deposits.31 In March, the Fed, FDIC, and OCC issued a
joint statement declaring “that financial institutions wil receive CRA consideration for
community development activities.”32 These activities include the following:
Loans, investments or services that support digital access for [LMI] individuals or
communities;
Loans, investments or services that support access to health care, particularly for [LMI]
individuals or communities;
Economic development activities that sustain small business operations, particularly in
[LMI] communities; and
Investment or service activities that support provision of food supplies and services for
[LMI] individuals or communities.33
Regulatory Relief
Banks are subject to “safety and soundness” regulations, which include capital and liquidity
regulatory requirements and examinations and off-site bank monitoring by bank regulators.
Similar to how regulators facilitated working with consumers affected by COVID-19 through
regulatory flexibility, bank regulators have also made certain adjustments to banking regulation
and supervision to ensure that safety and soundness regulations, such as liquidity and capital
requirements, do not impede banks’ abilities to respond to the credit needs of customers
negatively affected by COVID-19. The policy tradeoff is that these changes could negatively
affect banks’ safety and soundness at a time when banks face the prospect of rising default rates
and declining asset values. This section describes regulatory relief provided to bank depositories
and bank holding company (BHCs) in cases when the relief is applied to bank-like reporting and
liquidity requirements.
Recent changes span numerous different regulatory areas. Ways that regulators have provided
regulatory relief include the following: facilitating flexible supervisory requirements and
alternative examination schedules; deferring regulatory requirements that social distancing makes
difficult; delaying the implementation of new regulations; and changing or relaxing institutional
reporting requirements. These changes al ow banks with operational chal enges to focus on
serving customers under limited staffing.
Supervision
The social distancing guidelines resulting from COVID-19 have presented a chal enge for normal
supervision by regulators to ensure that banks comply with various laws and regulations. One
way regulators have adapted to this new order of operations is to help banks manage regulatory

30 For more on the Community Reinvestment Act (CRA; P.L. 95-128), see CRS Report R43661, The Effectiveness of
the Com m unity Reinvestm ent Act, by Darryl E. Getter.
31 FDIC, Disaster Relief and the Community Reinvestment Act, July 2013, at
https://www.fdic.gov/consumers/community/aei/regional/2013 -07-ct/disasterrelief-cra.pdf.
32 Federal Reserve, FDIC, and OCC, “Joint Statement on CRA Consideration for Activities in Response to COVID-
19,” March 19, 2020, at https://www.fdic.gov/news/news/financial/2020/fil20019a.pdf (hereinafter Fed, FDIC, and
OCC Joint Statement, March 2020).
33 Fed, FDIC, and OCC Joint Statement, March 2020.
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requirements during this period without the need for on-site examinations. For instance, the Fed
announced adjustments to its supervisory activities and priorities in response to the uncertainties
created by COVID-19 on March 24.34 Broadly, the Fed temporarily shifted its focus from
examination to monitoring in order to better understand “the chal enges and risks that the current
environment presents.” The Fed announced on June 15, 2020, that it would resume examination
activities, though it anticipated it would conduct exams off-site until conditions improved.35
Another way regulators have responded is by granting broad flexibility to banks with respect to
taking enforcement or supervisory actions against institutions attempting to work with customers
through the pandemic. For example, the banking agencies issued a joint statement on April 3,
2020, regarding a “flexible supervisory and enforcement approach during the COVID-19
emergency regarding certain consumer communications required by the mortgage servicing
rules.”36 This announcement is intended to help mortgage servicers provide programs to assist
struggling consumers affected by the pandemic.
Capital and Liquidity
One of the main ways regulators make sure financial institutions are prepared for negative
economic events is by ensuring banks hold ample capital and liquidity during good economic
conditions. Then, when adverse conditions occur, banks would have a buffer above the required
minimums to absorb losses while being able to continue providing credit to the economy.
Normal y, banks try to avoid a decline in buffers because it could attract regulatory scrutiny as a
sign of distress. In March 2020, bank regulators released a statement encouraging banks to use
their capital and liquidity buffers to support continued lending.37 This guidance reminds banks
that the purpose of the buffers is to ensure banks can keep lending during distressed times and
encourages banks to continue lending prudently. In addition, to encourage use of banks’ buffers,
bank regulators issued a rule change on March 20 on how capital is measured to make it easier for
banks to comply with capital rules that can place restrictions on a bank’s dividend payments and
other capital distributions.38 There also have been changes to large bank capital standards,
discussed in the “Regulatory Changes Affecting Large Banks” section, below.39
Ownership and Control
On January 30, 2020, the Fed adopted a final rule to revise its regulations related to
determinations of whether a company controls another company for purposes of the Bank

34 Federal Reserve, “Federal Reserve Statement on Supervisory Activities,” March 24, 2020, at
https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200324a1.pdf .
35 Federal Reserve, “ Federal Reserve Board announces it will resume examination activities for all banks, after
previously announcing a reduced focus on exam activity in light of t he coronavirus response,” press release, June 15,
2020, at https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200615a.htm .
36 CFPB, Federal Reserve, FDIC, NCUA, OCC, and Conference of State Bank Supervisors, “Joint Statement on
Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID -19
Emergency and the CARES Act,” April 3, 2020, at https://www.fdic.gov/news/news/press/2020/pr20047a.pdf.
37 Federal Reserve, FDIC, and OCC, “Statement on the Use of Capital and Liquidity Buffers,” March 17, 2020, at
https://www.fdic.gov/news/news/press/2020/pr20030b.pdf .
38 OCC, Federal Reserve, and FDIC, “Regulatory Capital Rule: Eligible Retained Income,” 85 Federal Register 15909-
15916, March 20, 2020.
39 Federal Reserve, FDIC, and OCC, “ Regulators temporarily change the supplementary leverage ratio to increase
banking organizations’ ability to support credit to households and businesses in light of the coronavirus response ,”
press release, May 15, 2020, at https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200515a.htm .
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Holding Company Act or the Home Owners’ Loan Act.40 As a result of COVID-19, many
companies, including regulated financial institutions, have expressed concerns about the effect of
the new control rule on various existing investments and relationships. In response, the Fed
delayed (from April 1 to September 30)41 the implementation of a new framework for what
factors determine “control” of a company for the purposes of the Bank Holding Company Act42
and the Home Owners’ Loan Act.43
Real Estate Appraisals
Appraisals are normal y required to ensure mortgages are backed by sufficient collateral to avoid
losses in case of default. Restrictions on nonessential movement and health and safety advisories
issued in response to the COVID-19 pandemic, including those relating to social distancing, have
complicated the performance and completion of real property appraisals and evaluations needed
to comply with federal appraisal regulations.
On April 17, 2020, the OCC, Fed, and FDIC issued an interim final rule aimed at addressing this
problem. The interim rule temporarily defers real estate-related appraisals and evaluations under
the agencies’ interagency appraisal regulations to al ow regulated institutions to extend financing
to creditworthy households and businesses quickly in the wake of the national emergency
declared in connection with COVID-19.44 Transactions involving acquisition, development, and
construction of real estate are excluded from this interim rule. These temporary provisions wil
expire on December 31, 2020, unless extended by the federal banking agencies.
Regulatory Changes Affecting Large Banks
Under the Dodd-Frank Wal Street Reform and Consumer Protection Act (Dodd-Frank; P.L. 111-
203) and Basel III45—an international accord that sets standards for bank regulation—the largest
banks face more complex and stringent regulations than other banks.46 As a result, a number of
regulations (or more stringent versions of regulations) apply only to large banks. The Fed has
delayed or relaxed a number of these regulations in response to COVID-19. For example, the Fed
announced that the modification to the definition of capital, discussed in the “Capital and
Liquidity” section, would also be applied to the total loss-absorbing capacity rules applied to the
largest U.S. banks and U.S. operations of foreign banks. The rules require those banks to hold
certain types and amounts of capital and debt at the holding company level.47
According to the Fed, one of the effects of COVID-19 on the banking system has been an
increase in the size of bank balance sheets due to customer draws on credit lines and acquisitions
of U.S. Treasury securities. As a result, banking organizations have been making substantial
deposits in their accounts at Federal Reserve Banks, potential y constraining the institutions’

40 Federal Reserve, “Control and Divestiture Proceedings,” 85 Federal Register 12398-12430, March 2, 2020.
41 Federal Reserve, “Control and Divestiture Proceedings,” 85 Federal Register 18427-18428, April 2, 2020.
42 12 U.S.C. §1841.
43 12 U.S.C. §1461.
44 OCC, Federal Reserve, and FDIC, “Real Estate Appraisals,” 85 Federal Register 21312-21318, April 17, 2020.
45 For more information on the Basel III Accords, see CRS Report R44573, Overview of the Prudential Regulatory
Fram ework for U.S. Banks: Basel III and the Dodd -Frank Act, by Darryl E. Getter.
46 For more information, see CRS Report R45711, Enhanced Prudential Regulation of Large Banks, by Marc Labonte.
47 Federal Reserve, “ Federal Reserve Board announces technical change to support the U.S. economy and allow banks
to continue lending to creditworthy households and businesses,” press release, March 23, 2020, at
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200323a.htm.
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ability to intermediate funds throughout the financial system and to consumers. In response, the
Fed took steps to ease strains in the Treasury market resulting from COVID-19 and to increase
banking organizations’ ability to provide credit to households and businesses. Specifical y, the
Fed relaxed the supplementary leverage ratio rule that applies to the largest banking organizations
by exempting certain safe assets from the banks’ exposure measures.48 The change to the
supplementary leverage ratio is intended to mitigate the risk of an increase in a bank’s balance
sheet from requiring it to hold more capital.
The Fed also al owed an exception to Wel s Fargo’s asset cap, imposed in response to Wel s
Fargo’s fake-accounts scandal, to al ow the bank to expand its Payroll Protection Program
loans.49
Ancillary Outcome of the Paycheck Protection Program: Income for Banks
The CARES Act (P.L. 116-136) created the Paycheck Protection Program (PPP) to provide smal businesses and
self-employed individuals with loans through the Smal Business Administration (SBA) 7(a) program so that they
may continue to pay employees and replace lost income resulting from Coronavirus Disease 2019 (COVID-19)
disruptions. The details of this program are beyond the scope of this report.50 For more information, see CRS
Report R46284, COVID-19 Relief Assistance to Smal Businesses: Issues and Policy Options, by Robert Jay Dilger, Bruce
R. Lindsay, and Sean Lowry.
One aspect of the program pertinent to this report is that businesses and individuals apply for the loans to banks,
among other types of lenders, who originate the loans. The rationale for utilizing private loan -making institutions is
that they are arguably better positioned, given their usual day-to-day operations and existing customer
relationships, to deploy PPP funds more quickly than a government institution.51 Banks and other lenders can
charge fees for originating loans, and thus earn income through their roles in administering the PPP program. This
feature potential y makes the PPP a source of income for the banking industry at a time when banks may expect
future losses.
PPP loans are guaranteed by the SBA.52 Provided banks col ect required documentation from borrowers, PPP
loans expose banks to relatively little risk of loss. Accordingly, the CARES Act mandated that they be given a zero
risk-weight for the purposes of determining banks’ risk-based capital requirements. In their rulemaking
implementing how PPP loans would be treated in regulation, the bank regulators exempted PPP loans from
affecting any bank capital requirements.53 Final y, the Federal Reserve has established the PPP Liquidity Facility,
which al ows banks to access low-cost liquidity using their PPP loans as col ateral. These features could make the
PPP attractive to banks.

48 Federal Reserve, “T emporary Exclusion of U.S. T reasury Securities and Deposits at Federal Reserve Banks From the
Supplementary Leverage Ratio,” 85 Federal Register 20578-20586, April 14, 2020.
49 Federal Reserve, “Federal Reserve Board announces, due to the extraordinary disruptions from the coronavirus, that
it will temporarily and narrowly modify the growth restriction on Wells Fargo so that it can provide additional support
to small businesses,” press release, April 08, 2020, at
https://www.federalreserve.gov/newsevents/pressreleases/enforcement20200408a.htm. For more on the Wells Fargo
scandal, see CRS In Focus IF11129, Wells Fargo—A Tim eline of Recent Consum er Protection and Corporate
Governance Scandals, by Cheryl R. Cooper and Raj Gnanarajah .
50 See Small Business Administration (SBA), “Paycheck Protection Program,” at https://www.sba.gov/funding-
programs/loans/coronavirus-relief-options/paycheck-protection-program.
51 Certain lenders specialize in originating SBA-guaranteed loans. See SBA, “100 Most Active SBA 7(a) Lenders,” at
https://www.sba.gov/article/2020/mar/02/100 -most -active-sba-7a-lenders.
52 SBA, “Business Loan Program T emporary Changes; Paycheck Protection Program,” 85 Federal Register 20811-
20812, April 15, 2020.
53 Federal Reserve, OCC, and FDIC, “Federal Bank Regulators Issue Interim Final Rule for Paycheck Protection
Program Facility,” press release, April 9, 2020, at https://www.fdic.gov/news/news/press/2020/pr20050.html.
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Reporting Requirements
Another way regulators have provided regulatory relief is by changing or relaxing institutional
reporting requirements. For instance, bank regulators granted banks an additional 30 days to file
their required quarterly reports on condition and income.54 The Fed granted a similar grace period
to bank holding companies (BHCs) and nonbank BHC subsidiaries with less than $5 bil ion in
assets.55
Accounting Standards
Regulators have also al owed institutions to take alternative approaches to accounting for certain
COVID-19-related financial impacts. For instance, on March 27, 2020, bank regulators
announced that banks could adopt an early change in the accounting methodology for certain
derivatives contracts, and certain banks could delay the effect on regulatory capital of a new
accounting standard (Current Expected Credit Loss, or CECL) related to estimating future
losses.56 The CECL announcement included an interim final rulemaking issued under the
regulators’ existing authority that implemented a delay period longer than the one required by the
CARES Act, which was enacted the same day as the announcement. The CARES Act mandate
and regulator rulemaking relating to CECL is discussed in the “Current Expected Credit Loss
(Section 4014)” section of this report.
Federal Reserve Actions Related to Bank Liquidity
In addition to the bank regulatory responses described in the previous section, the Fed has taken
actions to increase bank liquidity during the COVID-19 pandemic. These actions—specifical y,
encouraging banks to borrow from the Fed’s discount window and changes to bank reserve
requirements—affect banks directly at the depository level and are covered in this section of the
report.
The Fed has also taken actions focused primarily on stimulating the economy and creating
emergency facilities to help the firms and parts of financial markets harmed by the pandemic.
Banks are not the primary target of most of these Fed measures but may benefit incidental y. For
example, the Fed has made efforts to ensure there is ample liquidity in the financial system during
this period of financial stress. Ample liquidity also promotes the stability of the banking system
because of the liquidity mismatch inherent on a bank’s balance sheet—a bank tends to hold
relatively il iquid assets (e.g., loans) and liquid liabilities (e.g., demand deposits). However,
because providing banks with liquidity is not these programs’ primary purpose, they are beyond
the scope of this report.57

54 FFIEC, “ Financial Regulators Highlight Coordination and Collaboration of Efforts to Address COVID-19,” March
25, 2020, at https://www.ffiec.gov/press/pr032520.htm.
55 Federal Reserve, “Federal Reserve offers regulatory reporting relief to small financial institutions affected by the
coronavirus,” press release, March 26, 2020, at
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200326b.htm .
56 Federal Reserve, FDIC, and OCC, “Agencies announce two actions to support lending to households and
businesses,” press release, March 27, 2020, at
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200327a.htm. For more information on CECL, see
CRS Report R45339, Banking: Current Expected Credit Loss (CECL), by Raj Gnanarajah.
57 An illustrative example of a program that is not covered in t his report is the revived Primary Dealer Credit Facility,
originally created by the Fed in 2008, which allows prim ary dealers to borrow short -term loans backed by collateral
similar to how banks borrow from the discount window. Primary dealers are a group of large broker-dealers that are
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Lending to Banks
Banks can directly access funding through the Fed’s discount window, which al ows banks to
post il iquid assets as collateral for short-term loans at interest rates slightly higher than market
rates (the federal funds rate). The discount window is always available to banks, but because it
charges above market rates, these short-term loans are minimal during normal conditions. In
periods of stress, however, discount window lending can ramp up quickly.
In a March 15, 2020, announcement, the Fed encouraged banks to borrow from its discount
window to meet their liquidity needs.58 The Fed lengthened the maturity of discount window
loans to up to 90 days and reduced the discount rate to the top of the Fed’s target for the federal
funds rate, so that it is no longer significantly higher than market rates. The discount window can
be ineffective at ensuring ample liquidity, if banks using it face stigma. For example, if a bank is
perceived as financial y weak because it borrows from the discount window, then it may be
reluctant to do so. The March 15 announcement can be seen as an attempt to overcome that
stigma problem. To date, the use of the discount window has been less than it was during the
2007-2009 financial crisis. Outstanding discount window lending peaked at $51 bil ion on March
25. It has fal en considerably since but remains elevated compared to its use in normal economic
conditions. By contrast, discount window lending peaked at $110 bil ion in 2008, while a similar
Fed facility that was created in response to the 2007-2009 financial crisis peaked at $493 bil ion
in 2009.59
Banks can also access liquidity from the Fed through its payment systems. In the period between
when a payment is initiated and settled, banks may receive intraday credit (temporary overdrafts)
from the Fed if they need to use cash that they have not yet received from a pending payment. In
normal conditions, the Fed discourages excessive use of intraday credit. But in the March 15
announcement, the Fed encouraged banks to take advantage of intraday credit. On March 23, the
Fed announced that it was temporarily changing the terms of intraday credit to make it more
attractive by waiving fees and limits on its use.60 Additional y, the Fed delayed the upcoming
implementation of a rule that would limit intraday credit for the U.S. operations of foreign
banking organizations. The effective date was rescheduled from April 1 to October 1.61

active in government securities markets. Most are nonbank subsidiaries of a U.S. bank holding company or a foreign
banking operation that is operating in the United States but because they are not depositories, this type of facility is
beyond the scope of this report.
For a more complete examination of the Fed’s response to COVID-19, see CRS Report R46411, The Federal Reserve’s
Response to COVID-19: Policy Issues, by Marc Labonte.
58 Federal Reserve, “ Federal Reserve Actions to Support the Flow of Credit to Households and Businesses,” press
release, March 15, 2020, at https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm
(hereinafter Federal Reserve’s March 15 Announcement). T he other federal banking regulators also encouraged banks
under their supervision to use the discount window on March 16, 20 20.
59 T his facility, called the T erm Auction Facility, has not been revived during the COVID-19 pandemic to date. For
more information, see CRS Report R43413, Costs of Governm ent Interventions in Response to the Financial Crisis: A
Retrospective, by Baird Webel and Marc Labonte.
60 Federal Reserve, “T emporary Actions to Support the Flow of Credit to Households and Businesses by Encouraging
Use of Intraday Credit,” Policy Statement, Docket no. OP -1716, March 23, 2020, at
https://www.federalreserve.gov/newsevents/pressreleases/files/other20200423a1.pdf .
61 Federal Reserve, “ Federal Reserve Board announces implementation delay for changes to its Payment System Risk
Policy regarding intraday credit ,” press release, March 24, 2020, at
https://www.federalreserve.gov/newsevents/pressreleases/other20200324a.htm.
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Policies Increasing Bank Reserves
One measure of a bank’s liquidity is its reserves, which are measured as its vault cash and its
deposits at the Fed. The Fed’s actions in response to COVID-19 have greatly increased the Fed’s
balance sheet, and thus reserves available for use by banks to meet liquidity needs. In May 2020,
bank reserves totaled $3.2 tril ion, compared with around $40 bil ion from 2000 to 2007.62 The
Fed also temporarily reduced reserve requirements to zero, effective March 26, 2020.63 In its
announcement, the Fed noted that, due to changes in its operating framework that predate
COVID-19, reserves are now so plentiful that reserve requirements are no longer a binding
constraint. Reserve requirements are intended to ensure that banks hold adequate liquidity relative
to deposits, but required reserves cannot be used to meet liquidity needs to the extent that the
minimum balance must always be kept on hand.64 As a result of this change, the Fed also
eliminated the monthly transaction limit on savings accounts, which are not subject to reserve
requirements.65
Congressional Response to Help Banks
The CARES Act provides wide-ranging assistance to consumers, businesses, and the financial
services sector. A few provisions in Division A, Title IV of the CARES Act directly and indirectly
pertain to banks. For instance, the CARES Act includes four sections—4011, 4012, 4013, and
4014—that temporarily relax some of the regulations banks face. Section 4008 al ows the FDIC
to create a temporary guarantee for certain uninsured accounts. Sections 4022 and 4023 impact
mortgage servicers, many of which are banks.66
Concentration Limits (Section 4011)
To mitigate counterparty risk, national banks are subject to limits on how much they can lend to a
single borrower relative to their capital and their portfolio characteristics, unless the loan qualifies
for an exception enumerated by statute. The OCC general y has relatively narrow authority to
approve certain loans for an exception to the limit. Section 4011 grants the OCC broad, temporary
authority to exempt loans when doing so is “in the public interest.” This authority terminates the
earlier of (1) the date the public health emergency ends or (2) the end of 2020. To date, the OCC
has not issued a rulemaking implementing this section.
Community Bank Leverage Ratio (Section 4012)
Banks face a variety of safety and soundness requirements regarding how much capital they must
hold to protect against possible losses. Capital is a relatively expensive source of funding, so
requiring higher levels can reduce the amount banks lend. Certain smal banks can elect to be

62 Federal Reserve Bank of St. Louis, “T otal Reserves of Depository Institutions, not seasonally adjusted,” at
https://fred.stlouisfed.org/series/T OT RESNS.
63 Although the elimination of reserve requirements was announced as temporary, the Fed also announced that it
currently has no plans to reinstate them. Federal Reserve’s March 15 Announcement.
64 In practice, some reserve requirement rules related to averaging over time mitigate this perverse effect.
65 Federal Reserve, “Federal Reserve Board announces interim final rule to delete the six -per-month limit on
convenient transfers from the ‘savings deposit’ definition in Regulation D,” press release, April 24, 2 020, at
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200424a.htm .
66 For an overview, see CRS Report R46301, Title IV Provisions of the CARES Act (P.L. 116-136), coordinated by
Andrew P. Scott .
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subject to a single, relatively simple—but relatively high—capital rule cal ed the Community
Bank Leverage Ratio (CBLR). Bank regulators are authorized to set the ratio between 8% and
10%. Prior to the enactment of the CARES Act, it was set at 9%. Section 4012 directs regulators
to lower it to 8% and give banks that fal below that level a reasonable grace period to come back
into compliance with the CBLR. This relief expires the earlier of (1) the date the public health
emergency ends or (2) the end of 2020. The rulemaking implementing this section raises the
CBLR to 8.5% in 2021, before returning it to 9% on January 1, 2022.67
For more information, see CRS Report R45989, Community Bank Leverage Ratio (CBLR):
Background and Analysis of Bank Data, by David W. Perkins.
Troubled Debt Restructuring (Section 4013)
A Troubled Debt Restructuring (TDR) is a concession by a lender to a troubled borrower that it
would not general y consider under normal circumstances. General y Accepted Accounting
Principles (GAAP)68 require the lender to reflect in its financial records any potential loss as a
result of a TDR. Recording of such losses could negatively impact the lender’s ability to meet
regulatory requirements. Section 4013 requires federal bank and credit union regulators to al ow
lenders to determine if they should suspend the GAAP requirements in recognition of any
potential COVID-related losses from a TDR related to a loan modification. This relief expires the
earlier of (1) 60 days after the public health emergency declaration is lifted or (2) the end of 2020.
On April 7, 2020, the regulators issued a joint statement providing guidance on how banks and
credit unions should treat loans modified under Section 4013.69
In April, the agencies also issued revised guidance that included information about loan
modifications.70 The interagency statement al ows banks to provide certain modifications to loans
without designating them as a TDR if the modifications are related to COVID-19.
Current Expected Credit Loss (Section 4014)
Credit loss reserves help a financial institution absorb write-downs on loans and other assets. The
loss reserves give a financial institution a cushion before it is required to adjust income or bank
capital to reflect the losses from change in the asset value. In response to banks’ financial
chal enges during and after the 2007-2009 financial crisis, the Financial Accounting Standards
Board promulgated a new credit loss standard—CECL—in June 2016. CECL requires early
recognition of losses as compared to the current methodology. Al public companies were
required to issue financial statements incorporating CECL for reporting periods beginning
December 15, 2019. Section 4014 gives banks and credit unions the option to temporarily delay
CECL implementation until the earlier of (1) the date the public health emergency ends or (2) the
end of 2020.

67 Federal Reserve, OCC, and FDIC, “Agencies Announce Changes to the Community Bank Leverage Ratio,” press
release, April 6, 2020, at https://www.fdic.gov/news/news/press/2020/pr20048.html.
68 For more on Generally Accepted Accounting Principles (GAAP), see https://www.fasb.org/facts/index.shtml.
69 OCC, “Agencies Issue Revised Interagency Statement on Loan Modifications by Financial Institutions Working with
Customers Affected by the Coronavirus,” press release, April 7, 2020, at https://www.occ.gov/news-issuances/news-
releases/2020/nr-ia-2020-50.html.
70 CFPB, Federal Reserve, FDIC, NCUA, OCC, and Conference of State Bank Supervisors, “Interagency Statement on
Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus,”
March 22, 2020, at https://www.fdic.gov/news/news/press/2020/pr20038a.pdf .
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As mentioned in the “Accounting Standards” section earlier in the report, in the bank regulators’
joint interim final rule implementing a CECL delay, the bank regulators used their existing
authority to delay the rule further than mandated. The interim rule, as implemented, al ows banks
to delay CECL’s adoption for up to two years. The new CECL rule also delays the accumulation
of regulatory capital by two years. As before, the new CECL rule al ows accumulation of
regulatory capital to meet CECL’s requirements over three years after the initial two-year delay.71
As a result, banks wil not have to account for future COVID-19-related losses as quickly.
For more information, see CRS Report R45339, Banking: Current Expected Credit Loss (CECL),
by Raj Gnanarajah.
Guaranteeing Transaction Accounts (Section 4008)
Section 4008 of the CARES Act authorizes the FDIC to temporarily guarantee certain deposits
that are not eligible for regular FDIC deposit insurance due to the existing $250,000 per account
insurance limit. The provision does this by broadening the FDIC authority under Section 1105 of
the Dodd-Frank Act to guarantee bank debt in the event of a financial liquidity crisis by al owing
the FDIC to guarantee deposits in noninterest bearing transaction accounts in addition to bank
debt. By giving the FDIC this authority, a noninterest bearing transaction account (a type of
account that typical y exceeds the deposit insurance limit and is held by businesses and local
governments) can be given a government guarantee. The intent of this measure is to reduce the
likelihood that holders of these accounts make mass withdrawals in a short period of time, cal ed
a bank run, in response to uncertainty over individual bank solvency or banking system stability.
Section 4008 preemptively grants the requisite congressional approval for any such program
needed to respond to the COVID-19 pandemic, provided the FDIC guarantee terminates the
program no later than December 31, 2020.72 To date, the FDIC has not created a guarantee under
this authority.
For more information, see CRS Insight IN11307, The CARES Act (P.L. 116-136) Section 4008:
FDIC Bank Debt Guarantee Authority, by David W. Perkins.
Mortgage Forbearance (Section 4022 and 4023)
The CARES Act includes two sections intended to provide temporary relief for certain affected
mortgage borrowers:
 Section 4022 provides for forbearance and a foreclosure moratorium for federal y
backed single-family mortgages; and
 Section 4023 provides for forbearance for federal y backed multifamily
mortgages.
The forbearance provisions in the CARES Act apply to federal y-backed mortgages.73 Several
federal agencies insure or guarantee single-family mortgages, multifamily mortgages, or both—

71 OCC, “Regulatory Capital Rule: Revised T ransition of the Current Expected Credit Losses Methodology for
Allowances,” 85 Federal Register, March 31, 2020. For more on CECL, see CRS Report R45339, Banking: Current
Expected Credit Loss (CECL), by Raj Gnanarajah.
72 Section 4008 also authorizes the NCUA to increase their share insurance limit —the credit union equivalent of
deposit insurance—to an unlimited amount for noninterest bearing transaction accounts, provided the incre ase expires
by December 31, 2020. T o date, the NCUA has not used this authority to raise the limit .
73 A federally-backed mortgage is broadly defined in the legislation to include loans insured, guaranteed, or originated
by the Department of Housing and Urban Development through the Federal Housing Administration and the Section
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the CARES Act provisions cover al of these, including Federal Housing Administration-insured
reverse mortgages. The federal housing agencies have general y implemented these provisions;
however, forbearance on federal y backed mortgages also pertains to the banking regulators, as
many of the servicers of federal y backed mortgages are banks. On April 3, 2020, bank regulators
issued guidance encouraging mortgage servicers to place consumers in short-term forbearance
programs, consistent with the CARES Act, stating that they are taking a “flexible supervisory and
enforcement approach” to ensure that servicers are able to do this without further straining their
operational capacity. 74
For more information, see CRS Insight IN11334, Mortgage Provisions in the Coronavirus Aid,
Relief, and Economic Security (CARES) Act, by Katie Jones and Andrew P. Scott.
Outlook
As the financial implications of the coronavirus pandemic unfold for banks in the coming months
to years, there are reasons to be optimistic. The banking industry as a whole is in a better position
to withstand losses and an economic downturn than at other times in recent history, due to
changes in bank regulation and behavior made in response to the 2007-2009 financial crisis.
A number of regulatory actions and provisions in the CARES Act are aimed at easing pressures
banks may face as they deal with effects of the pandemic. Yet, it seems likely that banks wil
incur previously unexpected and potential y large losses on their loans to households and
businesses. For 535 banks, these loans make up more than 70% of the value of their total assets,
and the average capital buffer at those banks relative to the size of that exposure is smal er
compared with less concentrated banks. By one metric, 87 banks are in danger of becoming
seriously distressed.
There is great uncertainty surrounding how long the economic disruption from COVID-19 wil
last. Borrowers would be better able to maintain or resume loan payments if economic conditions
normalize quickly. If they do not, banks face potential losses that could be larger than safety and
soundness regulation is intended to guard against. Thus, while many U.S. banks are wel -
positioned to absorb potential coronavirus-related losses, segments of the industry could come
under distress, and a number of banks could fail.

184 and Section 184A programs for Native Americans and Native Hawaiians, respectively; the Department of Veterans
Affairs; the U.S. Department of Agriculture (which also directly originates some mortgages); or purchased and
securitized by the government -sponsored enterprises Fannie Mae and Freddie Mac.
74 CFPB, Federal Reserve, FDIC, NCUA, OCC, and Conference of State Bank Supervisors, “Joint Statement on
Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the COVID-19
Emergency and the CARES Act,” press release, April 3, 2020, at
https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200403a1.pdf .
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Author Information

David W. Perkins, Coordinator
Marc Labonte
Specialist in Macroeconomic Policy
Specialist in Macroeconomic Policy

Raj Gnanarajah
Andrew P. Scott
Analyst in Financial Economics
Analyst in Financial Economics

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
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under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
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