Featured Product

    FDIC Publishes 2019 Risk Review on Emerging Credit and Market Risks

    July 30, 2019

    FDIC published the 2019 Risk Review, which highlights emerging risks and exposures in the banking system. This issue of Risk Review provides a summary of conditions in the U.S. economy, financial markets, and banking industry. It also presents key risks to banks in two broad categories—credit risk and market risk. The credit risk areas discussed include commercial real estate, housing, leveraged lending and corporate debt, and non-bank lending. The market risk areas discussed are interest rate risk, deposit competition, and liquidity.

    The key highlights of the 2019 Risk Review include the following:

    • Commercial Real EstateCommercial real estate (CRE) market fundamentals remain favorable as the economic cycle matures. However, outstanding commercial real estate loan balances are rising and competition among lenders to maintain market share in the face of slowing loan growth is increasing, posing risk management challenges. FDIC examination findings since mid-2017 noted opportunities for improvement in risk management practices for CRE-concentrated institutions, particularly in the areas of board governance and oversight and portfolio stress testing. Despite the competitive pressures, CRE credit quality metrics at insured institutions remain satisfactory in early 2019.
    • HousingThe housing market began to slow in 2018 as concerns about affordability intensified. Banks with concentrations in this portfolio could be vulnerable to the slowdown, but credit quality has been resilient so far. Among FDIC-insured institutions, the condition of the residential mortgage portfolio is favorable, but some banks report significant loan concentration levels and increased competition.
    • Leveraged Lending and Corporate DebtCorporate bonds and leveraged loans have become increasingly risky, as the share of low-rated bonds has grown and lender protections in leveraged loans have deteriorated. Direct bank exposure to corporate debt risks is concentrated in funded and unfunded revolving leveraged loans and mortgages, while indirect exposures are opaque.
    • Non-bank Financial Institution LendingBanks are exposed, directly and indirectly, to non-banks. This includes direct lending to nonbank financial institutions. By lending to non-depository financial institutions, banks are increasingly accruing direct and indirect exposures to these institutions and to the risks inherent in the activities and markets in which they engage.
    • Interest Rate Risk and Deposit Competition—The current interest rate environment presents earnings and funding challenges to banks. Rising rates and deposit competition have begun pushing deposit costs higher and are affecting the mix of deposits, particularly at non-community banks. Most banks continue to report net interest margin growth, but banks with rising funding costs and a high proportion of long-term assets may face near-term margin pressure.
    • Liquidity—Short-term liquidity at smaller banks has declined in recent years, potentially reducing these institutions’ ability to manage a future downturn.

     

    Related Links

    Keywords: Americas, US, Banking, Risk Review, Credit Risk, Market Risk, Interest Rate Risk, Liquidity, Commercial Real Estate, Leveraged Lending, FDIC

    Featured Experts
    Related Articles
    News

    OSFI Outlines Prudential Policy Priorities for Coming Months

    OSFI has set out the near-term priorities for federally regulated financial institutions and federally regulated private pension plans for the coming months until March 31, 2022.

    May 06, 2021 WebPage Regulatory News
    News

    BIS Announces TechSprint on Innovative Green Finance Solutions

    Under the Italian G20 Presidency, BIS Innovation Hub and the Italian central bank BDI launched the second edition of the G20 TechSprint on the lookout for innovative solutions to resolve operational problems in green and sustainable finance.

    May 06, 2021 WebPage Regulatory News
    News

    EBA Proposed Regulatory Standards for Central Database on AML/CFT

    EBA proposed the regulatory technical standards on a central database on anti-money laundering and countering the financing of terrorism (AML/CFT) in EU.

    May 06, 2021 WebPage Regulatory News
    News

    ECB Responds to EC Consultation on Crisis Management Framework

    ECB published its response to the targeted EC consultation on the review of the bank crisis management and deposit insurance framework in EU.

    May 06, 2021 WebPage Regulatory News
    News

    ACPR Publishes Version 1.0.0 of RUBA Taxonomy

    ACPR published Version 1.0.0 of the RUBA taxonomy, which will come into force from the decree of January 31, 2022.

    May 06, 2021 WebPage Regulatory News
    News

    BCBS, CPMI, and IOSCO to Survey Market Participants on Margin Calls

    BCBS, CPMI, and IOSCO (the Committees) are inviting entities that participate in market infrastructures and securities markets through an intermediary as well as non-bank intermediaries to complete voluntary surveys on the use of margin calls.

    May 05, 2021 WebPage Regulatory News
    News

    ECB Amends Decision on TLTRO III

    ECB published Decision 2021/752 to amend Decision 2019/1311 on the third series of targeted longer-term refinancing operations or TLTRO III.

    May 05, 2021 WebPage Regulatory News
    News

    Central Bank of Ireland Issues Draft Template for AnaCredit Reporting

    The Central Bank of Ireland published Version 2.7 of the draft credit data template and rules for monthly AnaCredit reporting by banks.

    May 05, 2021 WebPage Regulatory News
    News

    OSFI Consults on Revisions to BCAR and Leverage Requirements Returns

    OSFI proposed revisions to the Basel Capital Adequacy Reporting (BCAR) and leverage requirements returns for the 2023 reporting, with the comment period ending on July 09, 2021.

    May 04, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Revisions to Nonperforming Loan Data Templates

    EBA published a discussion paper on review of the standardized nonperforming loans (NPL) transaction data templates, along with the proposed revised NPL data templates.

    May 04, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6936