2009 Annual Report Covers Tough Year in Banking
The Atlanta Fed's 2009 Annual Report provides perspective on a challenging year in banking in the Southeast, as the industry sought stability and stronger risk management even as problems persisted.
In addition to exploring the industry's performance, the annual report examines the role and work of financial regulators, lessons learned, and supervisory changes undertaken by the Atlanta Fed and the broader Federal Reserve System.
Promising signs amid difficulties
Three performance measures summarize the difficulties that plagued the region's financial institutions.
Drawing information from loss reviews
From material loss reviews of southeastern banks, a consensus emerges: examiners were not sufficiently forceful in compelling troubled institutions to improve their business practices, most notably in the areas of real estate lending and risk management. However, the annual report notes that frontline examiners were equipped with tools that in retrospect were inadequate in a crisis.
As Atlanta Fed President Dennis Lockhart notes in the annual report's introductory letter, the financial crisis clarified the need for improvements in banking regulation, including greater horizontal supervision. This approach considers interconnections among firms and how these connections can affect the financial system and economy. Lockhart also comments briefly on regulatory reform.
"Let us hope that the regulatory regime for the future truly strengthens our defenses against the recurrence of financial crises," he writes.
July 8, 2010