is clear now that those calls were mistaken. the board ’ s ccyb policy statement details the range of financial system vulnerabilities and other factors the board may take into account as it evaluates settings for the buffer, including but not limited to, leverage in the financial sector, leverage in the nonfinancial sector, maturity and liquidity transformation in the financial sector, and asset valuation pressures. our policy has been to maintain a 0 percent ccyb when vulnerabilities are within the normal range and, when they rise to a level meaningfully above normal, to increase the ccyb to a level that compensates for the rising vulnerabilities. as you no doubt have noticed, we did not increase the ccyb in the strong economy before the covid event. that is because we have a consistent, disciplined, and comprehensive framework that lays out the proper factors to evaluate when deciding to turn the ccyb on or off, and the framework did not suggest vulnerabilities were particularly high. that framework has guided our decisions over the past few years and provided clear and transparent guidance to the public. the federal reserve should only turn on the ccyb in times of significant irrational exuberance ; for example, in the face of a self - reinforcing cycle of borrowing and asset prices of the kind we saw in 2004 – 06. yet, in my view, our through - the - cycle capital levels — that is, our fixed capital requirements — in the united states have been set so high, that our ccyb is effectively already “ on. ” as a result, existing capital requirements for banks in the united states were already at a high enough level to maintain financial stability. when capital levels are sufficiently high, it would needlessly reduce the ability of firms to provide credit to their customers to turn on an additional capital requirement like the ccyb. indeed, as i said at the time, the problem under our framework would instead be finding ways to turn down the ccyb thus embedded in our through - the - cycle capital requirements when the system was hit by a shock. although the fed had no formal ccyb to release when the covid event struck, the u. s. banking system played a major role in taking deposits from, and extending credit to, households and businesses in 2020, and we did indeed have to take temporary measures to “ turn down ” our implied ccyb through limited exemptions to

no additional fiscal measures to support the economy. so how did the bank regulatory system do? by any measure, quite well. entering the covid event, the banking system was fortified by over 10 years of work to improve safety and soundness, both by regulators and by banks themselves. higher levels of capital and liquidity, better risk management, and more robust systems enabled the banking system to absorb an unprecedented shock — while providing refuge from market instability, delivering essential public aid, and working constructively to support borrowers and communities. in short, the full set of post - 2008 reforms — as refined and recalibrated by the work of the last four years — ensured that this time would truly be different than the last. with respect to capital, banks actually built capital during the covid event, thanks to actions from regulators and their own voluntary actions, even despite setting aside close to $ 100 billion in loan loss reserves. the aggregate common equity tier 1 capital ratio for the banking system in the second half of 2020 materially exceeded its pre - covid - event level. capital ratios remain well above regulatory minimums for all firms. banks also strengthened their liquidity positions during the covid event, primarily due to an influx of deposits and their reinvestment in reserves. the share of bank liquid assets as a share of total assets far exceeds the pre - covid - event metric. banks also served as a source of strength to the economy. with respect to lending, businesses were able to draw on pre - existing credit lines to meet the massive demands for cash. banks of all sizes also funded the bulk of the more than $ 795 billion in paycheck protection program loans. according to our weekly data, commercial and industrial loans increased $ 715 billion between the week of february 26th and their peak on may 13th. for millions of struggling households, interest and principal payments on loans were delayed. in addition, through may 2021, more than $ 2. 2 trillion of central bank reserves and roughly $ 3. 7 trillion of deposits had been absorbed by banks. overall, the regulatory framework for banks constructed after the financial crisis, with the refinements and recalibrations we have made over the last few years, has held up well. the banking system remained strong and resilient, and banks served as a source of strength to the economy, and our stress tests indicated this would have been the case even without the substantial fiscal assistance provided to the rest of the economy. we