We hope you are having a great start to December and the holiday season.
We aren’t going to go into full Chicken Little mode and say “the sky is falling!” Yet, if you dig for the facts in news reports – we’re likely heading for tough economic waters. Data continues to point toward “when” and not “if.” This is the ideal time for bankers to assess risk levels and take proactive steps to mitigate those potential risks.
It is the end of the year and you are busy. Are there audits coming that you need to get buttoned down? Is it time for an external loan review? Let us know. We’d love to help take some off of your plate and have you feeling optimistic about your 2019 tasks.
If you need help understanding how any of these news items could affect your bank, please don’t hesitate to reach out to us at (918) 791-0699 or by emailing us at firstname.lastname@example.org.
FDIC chair: We need to be preparing for the next downturn (source)
- One of the nation’s top banking regulators said Monday, Dec. 3rd that she is staying vigilant for the next downturn and echoed concerns with leveraged lending.
- “Things are looking good. Having said that, it is times like this that we need to be looking ahead and preparing for the next downturn,” Jelena McWilliams said.
- Last week, the Federal Reserve released a report flagging growth in non-financial leveraged loans. They warned that credit standards “appear to have deteriorated over the past 6 months.”
- The Office of the Comptroller of the Currency similarly reported that leveraged lending has suffered from “eased underwriting standards” and warned banks to be mindful of their direct and indirect exposure to corporate debt markets.
Does an Inverted Yield Curve Mean a Recession is Coming? (source)
- By one measure, the yield curve inverted on Monday, Dec. 3rd: The interest rate on 5-year Treasury bonds slipped below the rate on 3-year bonds.
- This is a worrying sign because rates on longer-term bonds are typically higher than those on shorter-term bonds, and such inversions are associated with recessions.
- The interest rate on 2-year Treasury bonds is just above 2.8%, while 10-year Treasury bonds are just below 3%. This is the closest they have been since the Great Recession ended.