2 the impact of the ppp during the pandemic one driver for the increase in small business lending was, of course, the small business administration ’ s paycheck protection program or ppp. the ppp was funded by the u. s. treasury department through forgivable loans that enabled small businesses to maintain payroll, retain employees who may have been laid off in response to the social distancing protocols that went into effect in april 2020, or to cover other overhead costs. to support the ppp, the federal reserve provided a liquidity backstop to ppp lenders through its paycheck protection program liquidity facility or ppplf. in recognition of the evolution in the banking landscape that i referenced a few moments ago, the ppplf was designed to not only provide a liquidity backstop to banks and credit unions, but also to serve non - bank fintechs, community development financial institutions, and agricultural finance companies that participated in the ppp. given the important role minority - owned banks play in the allocation of credit in their communities, the federal reserve also actively engaged minority depository institutions to ensure they had the tools they needed to benefit from the fed ’ s emergency liquidity programs. to be sure, the ppp and the ppplf will provide significant research material for years to come. i understand from reviewing the papers accepted into this year ’ s proceedings that it has already driven the work of several economists you ’ ll be hearing from over this two - day conference. in reviewing the data on these programs, however — and here i must credit the federal reserve bank of new york ’ s “ supervision transformational trends ” program — we see that a substantial majority of ppp loans, nearly 73 percent, were made by insured depository institutions. these loans also accounted for nearly 90 percent of the aggregated loan amount for all ppp loans. getting a bit more granular, we can see that community banks made 32 percent of all ppp loans while large banks made 35 percent of all ppp loans, with credit unions and savings banks accounting for the rest of the loans made by banking institutions. fintechs accounted for approximately 13 percent of all ppp loans and more than half of those were made as a result of a partner bank relationship. 2 / 7 bis central bankers'speeches a recent working paper from the national bureau of economic research ( nber ) offers additional detail on the roles these different types of lenders played in all

bank regulator, that we needed to avoid overreacting and instead approach supervision in a more measured way that allowed banks the flexibility to work with their customers. we needed to empower banks to manage those key relationships in their loan portfolios in a way that was beneficial to their customers without exposing the banks to risk. what we saw, as a result of this approach, is that the industry made responsible decisions that kept credit flowing throughout the pandemic and enabled businesses across the u. s. to continue operating. but the question remains : how should supervisors, and banking supervision itself, apply what we learned going forward? during the pandemic, we changed our supervisory approaches based on necessity, but now we need to look ahead and make sure that we ’ re adjusting our supervisory model in ways that allow banks greater flexibility to innovate to compete in today ’ s quickly evolving banking environment — without sacrificing important consumer protections or the health and safety of our banking system. the future of supervision to start, we must acknowledge the interconnectedness of the future of banking and the future of bank supervision. supervision has to evolve because the banking industry is evolving. available technology, analytical capabilities, and customer and workforce preferences are driving this evolution in how financial sector products and services are delivered. we recognize that our workforce, processes, and technology must align with these changes to ensure that an effective, transparent, and timely supervision program is maintained. therefore, the federal reserve is embarking on an initiative to investigate the implications of these changes for the federal reserve ’ s supervision function. 6 4 / 7 bis central bankers'speeches the goal of this initiative is to ensure our supervisory approaches accommodate a much broader range of activities while ensuring we don ’ t create an unlevel playing field with unfair advantages, or unfair disadvantages, for some types of firms versus others. this will include investigating technology and innovative business practices that increase our agility and efficiency. innovation is a way of life for banks, it should be for supervisors as well. but we must do this in a way that also preserves what we know works and what we learned can work during the pandemic. before sharing my views on the underlying principles that need to guide our thinking on our future supervisory approaches, i ’ ll first offer some thoughts on a few aspects of federal reserve supervision that i believe must be preserved even as we think expansively about the future : 1. the first being the federal reserve ’ s supervisory structure. although the