Banking and Finance Law Daily Warren questions G-SIB’s Coronavirus readiness
Monday, March 2, 2020

Warren questions G-SIB’s Coronavirus readiness

By Colleen M. Svelnis, J.D.

Senator Warren has written to the heads of the five largest U.S. banks, asking for details on their plans to monitor and mitigate economic risks related to the coronavirus outbreak.

Senator Elizabeth Warren (D-Mass), Ranking Member of the Senate Banking Subcommittee on Consumer Protection and Financial Institutions, sent letters to the CEOs of the largest U.S.-based global systemically important financial institutions (G-SIBs)—Citigroup, JPMorgan Chase, Goldman Sachs, Bank of America, and Morgan Stanley—questioning how the banks are monitoring and preparing to mitigate the economic risks related to the outbreak and spread of the coronavirus. Citing the banks’ size and role in the global economy, Warren asks the CEOs to respond to her questions regarding how they are monitoring and preparing for the risks associated with this outbreak by March 13, 2020.

The letters state, "As a globally systemic important bank, your institution and the customers it serves could be impacted either directly through exposures to areas where the virus has spread or indirectly through a change in market conditions caused by disruptions in supply chains, a drop in tourism or travel, or numerous other factors that could cause a slowdown in economic growth." The letters ask the CEOs to provide information regarding how their financial institutions evaluate the risks to the institutions and its customers associated with coronavirus, the extent to which each institution is exposed to those risks and prepared to absorb their impact, and how they are monitoring the developments going forward.

As described in the letter, the coronavirus could have an impact on a bank’s operations in several ways. Customers may be among the businesses that have curbed or shutdown their operations due to the virus, making it harder for them to repay their loans. Businesses could be open and in a region that has not yet been affected by the virus, but could still face supply chain disruptions. The letter states that these effects may be more pronounced in banks with direct exposure to the regions where the coronavirus is most prevalent, but notes that because of the interconnected nature of global supply chains, even banks with limited exposure to these areas will feel an impact.

According to the letters, the International Monetary Fund and officials from the Federal Reserve have both projected that coronavirus will slow Chinese growth and affect the global economy. Warren states that global oil and gas prices have declined to levels near record lows as the transportation of goods and services have slowed and that "stock markets around the world have posted declines not seen since the financial crisis, a sign of growing investor concern."

Warren has also introduced legislation requiring all funds that have been appropriated to build a border wall-including funds directly appropriated by Congress and funds diverted by the executive branch from other accounts-to be immediately transferred to the U.S. Department of Health and Human Services (HHS) and the United States Agency for International Development (USAID) for the purpose of combatting the novel coronavirus.

Late last week, several senior members of the House Financial Services Committee wrote to Trump Administration officials and regulators seeking an impact report and response plan for battling the possible economic ramifications an outbreak of coronavirus may have on the American public, and an analysis of the impact of the virus on the domestic economy and international stability (see Banking and Finance Law Daily, Feb. 28, 2020).

Companies: Bank of America; Citigroup; Goldman Sachs; Morgan Stanley; JPMorgan Chase

MainStory: TopStory FinancialStability

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