Let me set the stage for our discussion by outlining the economic effects of the pandemic most relevant to the banking sector, describing the Federal Reserve’s response to the crisis, and then making some observations about conditions for smaller banks. The Pandemic’s Effects on the Economy and Banking We began this year with the economy in excellent shape—by some measures the strongest in decades.
A single mechanism for financial supervision and a common authority with strong tools for bank resolution – could have more easily dealt with the situation. Second, we have learned that shock absorbers at the national level are insufficient in the face of a major financial and economic crisis. Hence the European level has an important role to play.