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Interest Rate Risk

All articles tagged with #interest rate risk

finance1 year ago

"Federal Regulators Intensify Focus on Banking and Commercial Real Estate Risks"

The Federal Reserve's top supervisory official, Michael Barr, stated that bank regulators have been more aggressive in identifying and addressing issues at banks, particularly focusing on interest rate risk and commercial real estate exposure. The Fed is conducting additional exams at firms facing large unrealized losses and is closely monitoring banks nearing the $100 billion threshold for stricter oversight. Barr emphasized the need for supervisors to help banks focus on areas that matter most and mentioned the possibility of imposing temporary higher capital and liquidity requirements on banks facing risk management issues.

via Fox Business|
#bank-regulation#bank-supervision#commercial-real-estate
finance2 years ago

US Banking Industry Faces Significant Risk of Collapse Due to Unrealized Losses and Deposit Shifts.

More than 700 American banks are facing "significant safety and soundness risk" due to massive unrealized losses on their balance sheets, according to newly released data from the Federal Reserve. The Fed points to its own interest rate rises as the catalyst for the losses, and says banks have been taking steps to try and avoid further losses for months, including changing the accounting treatment of their securities, hedging interest rate risk and retaining more tangible capital.

via The Daily Hodl|
#federal-reserve#finance#interest-rate-risk
finance2 years ago

Banking Sector Vulnerabilities Exposed: Lessons from Michael Milken and IMF Director.

Michael Milken, the Chairman of the Milken Institute, has stated that the current banking crisis is due to a classic asset-liability mismatch that has been repeated throughout history. He believes that banks should not borrow short and lend long, and that they should exercise caution on liability and asset management. Milken also predicts that there will be a decrease in the percentage of loans owned by the banking system in the aftermath of the crisis, as they move into the hands of pension funds with long-term liabilities.

via CNBC|
#asset-liability-mismatch#banking-crisis#conservative-risk-management
finance2 years ago

Navigating the Future of Banking Amidst Recent Failures.

Mismanagement of interest rate risk and reliance on uninsured deposits were at the core of recent bank failures. Regulators historically address interest rate risk through supervision, but there are potential policy changes to encourage banks to better manage it. Deposit insurance systems aim to balance reducing the risk of runs with promoting market discipline. Policymakers should evaluate any potential policy changes thoughtfully and remain mindful of how they impact the majority of banks in the majority of times.

via FDIC|
#banking#deposit-insurance#finance
finance2 years ago

Auditors Neglected to Identify Risks Leading to Bank Failures

KPMG LLP failed to flag the risks building up in Silicon Valley Bank just 14 days before the bank collapsed. While the audit firm flagged potential losses on loans, it remained silent on the bank's unrealized bond losses and its ability to hold them given a reliance on potentially flighty deposits. Experts are questioning how KPMG missed the interest-rate risk.

via The Wall Street Journal|
#audit#bank-collapse#finance
finance2 years ago

SVB's Mismanagement and Rapid Withdrawals Lead to Regulatory Crackdown.

The Federal Reserve's head of banking supervision, Michael Barr, said he was made aware of Silicon Valley Bank's interest rate risk-related issues in mid-February, just weeks before its failure. Fed staff had previously raised concerns over SVB's interest rate risk and liquidity management in November 2021 and barred the bank from growing through mergers or acquisitions in mid-2022. However, Barr said he was not made aware of the issues until a staff presentation last month.

via New York Post |
#banking-supervision#federal-reserve#finance
finance2 years ago

Insights from Former FDIC Chair on Regional and Global Banking Systems

Former FDIC chief Sheila Bair warns that the focus on regional banks as the only source of worry for potential fallout from the Federal Reserve's rapid pace of interest-rate hikes in the past year is "counter productive". She argues that all banks, regardless of size, need to be mindful of interest-rate risk and how it is being managed. The recent collapse of Silicon Valley Bank and Signature Bank highlights the risk confronting all banks. Bair has been calling for a pause on Fed rate hikes since December, warning that a financial crisis could have catastrophic consequences.

via MarketWatch|
#bank-failures#federal-reserve#finance
finance2 years ago

"Federal Reserve Chair Powell Criticizes Silicon Valley Bank Management"

Federal Reserve Chairman Jerome Powell criticized the management of Silicon Valley Bank (SVB) for failing to manage the bank’s exposure to interest-rate risk and uninsured deposits. SVB was overexposed to long-dated Treasury securities that created substantial interest-rate risk as the Federal Reserve hiked rates to tamp down inflation. The bank's stock plummeted and sparked concern among depositors who rushed to take their money out, exacerbating the bank's woes and prompting its failure.

via Fox Business|
#federal-reserve#finance#interest-rate-risk
finance2 years ago

The Fed's Response to Silicon Valley Bank Collapse.

The Federal Reserve supervisors were aware of the mounting problems at Silicon Valley Bank (SVB) before it collapsed, according to a report by Bloomberg. SVB received several notices from supervisors at the Fed warning it of a key problem on its balance sheet - unhedged interest rate risk. The report comes amid questions about the role of senior Fed officials in examining the causes of the collapse.

via TPM|
#bank-supervision#collapse#federal-reserve