Comptroller Dugan Tells Senate Panel National Banks Have Capacity to Withstand Declining Asset Quality

WASHINGTON—Comptroller of the Currency John C. Dugan told a Senate subcommittee today that while credit quality is continuing to worsen, the vast majority of national banks are strong and have the financial capacity to withstand declining asset quality.

"Net capital levels in the national banking system have increased by more than $186 billion over the last two years, and net increases to loan loss reserves have exceeded $92 billion," Mr. Dugan said in testimony before the Senate Banking Subcommittee on Financial Institutions. "While these increases have considerably strengthened national banks, we anticipate additional capital and reserves will be needed to absorb additional potential losses in banks’ portfolios."

The Comptroller told the panel that the OCC, which supervises over 1,600 national banks, accounting for 61 percent of all bank and thrift assets, is taking a balanced approach to supervision that encourages bankers to lend and to work with borrowers in a safe and sound manner, while recognizing and addressing problems on a timely basis.

"We are encouraging banks to work constructively with borrowers who may be facing difficulties and to make new loans to creditworthy borrowers, although it is true that in today’s weaker economic environment, credit demand among businesses and consumers has significantly declined," Mr. Dugan said.

Related Links

• Oral Statement (PDF)
• Testimony (PDF)
• Comptroller of the Currency John C. Dugan