for release on delivery 6 : 00 p. m. est december 3, 2018 celebrating excellence in community development welcoming remarks by jerome h. powell chairman board of governors of the federal reserve system at inaugural janet l. yellen award for excellence in community development washington, d. c. december 3, 2018 thank you, anna. it ’ s an honor to be part of this important occasion. tonight is an opportunity to recognize the vital contributions of the federal reserve ’ s community development staff, and an opportunity to honor chair yellen, who did so much to advance the fed ’ s community development mission. briefly, i would like to focus on the importance of promoting a strong economy that extends opportunity to all and on the role our community development staff plays to advance that goal. the federal reserve ’ s mission is to promote a strong economy and sound financial system ; i am glad to say we have made a great deal of progress toward those goals. unemployment is 3. 7 percent, the lowest in nearly half a century. over 17 million jobs have been created during this expansion, with an additional 250, 000 created in october. beyond the labor market, there are other signs of economic strength. the steady decline in the unemployment rate is mirrored by the decline in financial hardship reported by respondents to the federal reserve ’ s survey of household economics and decisionmaking over the past five years. 1 wage gains, increased household wealth, and elevated consumer confidence are supporting robust consumer spending. since the crisis, we have also taken numerous steps to make the financial system safer and stronger, leaving it better equipped to support the financial needs of consumers and communities through good times and bad. 2 board of governors of the federal reserve system, report on the economic well - being of u. s. households in 2017 ( washington : board of governors, may 2018 ), www. federalreserve. gov / publications / files / 2017 - reporteconomic - well - being - us - households - 201805. pdf. jerome h. powell, “ brief remarks on the u. s. economy ” ( speech at rhode island business leaders day, washington, d. c., september 27, 2018 ), www. federalreserve. gov / newsevents / speech / powell20180927a. htm. - 2however, the benefits of this strong economy and sound financial system have not reached all americans. the aggregate statistics tend to mask important disparities by income, race, and geography

, npl resolution continued in 2020, notably through the disposal of legacy npls. our central expectation is for a sustained recovery. this would help create a virtuous circle between : improving corporate sector health, improving profitability in the banking sector and strong sovereign ’ s credit standing, permitting governments to continue to support households and businesses where necessary. but it is worth noting that the recovery could well turn out bumpy, and if future developments inhibit a strong recovery, bank provisions may turn out to be insufficiently conservative. that could risk creating a negative chain of events, through rising defaults, greater deterioration in asset quality, a restricted flow of credit to the real economy, and destabilising feedback loops between banks, sovereigns and corporates. in all cases, the apparent decoupling of asset quality trends from economic developments can mainly be explained by the unprecedented policy support provided to the economy. this support could also just prolong the typical lag between the recession and the rise in npls rather than prevent npl formation. there are already some early signs of weakening credit quality, for example the share of loans reported as subject to heightened credit risk has risen significantly and asset quality is likely to deteriorate once support measures are phased out. as the coronavirus shock affected the euro area economy very unevenly, credit risk metrics have varied widely across sectors. the deterioration is most visible in sectors that were hit harder by the pandemic, such as services, while loan performance problems are less prevalent in manufacturing. yet even with the projected improvements, the outlook for bank profitability remains subdued. analysts expect euro area banks ’ return on equity to recover only gradually, reaching 6 % by 2022. on average, this would still fall short of their cost of capital. 1 moreover, bank profitability in the euro area is expected to trail well behind that of large us banks, whose return on equity is currently projected to reach about 12 % by 2022. euro area bank valuations remain low when compared with those of their peers around the world, particularly those of us banks. looking beyond the challenges presented by the coronavirus pandemic, addressing pre - existing structural weaknesses remains crucial to sustainably improve profitability. the relatively lower valuations of euro area banks predate the pandemic, even if they have been accentuated by recent developments. profitability continues to be hampered by overcapacity. banks continue to operate in a competitive environment, with revenues under pressure not