ViewPoint: Introduction

Introduction | Spotlight: Outlook Conference | State of the District | National Banking Trends


By Michael Johnson, Senior Vice President
Supervision & Regulation
Federal Reserve Bank of Atlanta

Mike JohnsonWelcome to "ViewPoint" for the first quarter of 2012. In case you missed it, we thought it would be fitting to present a concise summary, amplified with video interview clips, of key takeaways from the 2012 Banking Outlook Conference the Atlanta Fed hosted on March 1.

But before we focus on what is ahead, I'll start with a look back on the performance and condition of Sixth District banks for 2011. On an aggregate basis, I am pleased to report that district banks posted their first positive earnings in over two years. While we anticipate and are still experiencing some bank failures in 2012, it is reassuring to see aggregate earnings turn positive, along with an improvement in asset quality metrics across the spectrum. To be sure, the number of problem banks remains high, but district banks' Texas ratios show that the amount of stressed assets at banks is declining, which should mean fewer failures and better performance going forward.

Overall, there are more positive trends than negative ones, and the outlook for 2012, as discussed at our March 1 conference, appears guardedly better for banks than it did in 2011. Despite an array of risks on the horizon, my hope is that prospects augur well for continued improvement in banking conditions and increased profitability for district banks, in particular.

In addition, I want to draw your attention to the following three supervisory letters that the Federal Reserve System recently issued. SR 12-2 addresses frequently asked questions about the interagency advisory on interest rate risk management issued in early 2010. SR 12-3 provides interagency guidance on allowance estimation practices for junior lien loans and lines of credit, a key risk on our radar screen. And SR 12-4 is intended to provide more transparency regarding the factors the Federal Reserve will consider in evaluating whether to upgrade supervisory ratings for community banking organizations. For more information on these and other supervision and regulation letters, please refer to the Board of Governors' website.

Lastly, you probably saw the results from the recently released stress test. Clearly, the banking industry has added significant capital buffers sufficient to withstand the draconian scenario depicted in this year's test. While specific capital stress tests are only required for the largest banks, it is always important to understand key vulnerabilities and risks and the potential impact on your bank.

As always, I look forward to hearing from our readership, so please share with me any feedback you may have at, and good luck in 2012.

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