Warren presses big banks on preparation for coronavirus fallout

Sen. Elizabeth Warren (D-Mass.), a Democratic presidential candidate, pressed the chief executives of five major U.S. banks on how they are preparing for the potential financial damage of the coronavirus outbreak.

In a series of Friday letters, Warren asked the chiefs of JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley to explain how they will “evaluate the risks to your institution and its customers associated with coronavirus, the extent to which your institution is exposed to those risks and prepared to absorb their impact, and how you are monitoring the developments going forward.”

All five of the banks questioned by Warren are considered “globally systemically important” under federal regulations, or big and interconnected enough to trigger an international financial panic upon their collapse. The banks are subjected to strict federal oversight and capital requirements, and could be liquidated by the federal government if they fail.

“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,” Warren wrote.

Warren’s letters come amid growing concern about the global economic toll of the coronavirus outbreak and a weeklong rout on Wall Street. U.S. stocks have suffered their worst week since the depths of the 2007-08 financial crisis, plunging all three major indexes into a correction.

The Dow Jones Industrial Average had lost more than 800 points, a 3-percent drop, while the S&P Index and Nasdaq composite were down 2.6 percent and 2 percent respectively shortly before the end of Friday trading.

Federal Reserve Chairman Jerome Powell also said Friday that the central bank will likely take action to boost the U.S. economy, hinting toward a rate cut at its upcoming March meeting.

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy,” Powell said in a Friday statement.