FDIC Warns of Credit and Market Risk in the Banking Industry

In a 2019 FDIC Risk Review, the agency highlighted credit and market risk as key threats to the banking industry.

With regard to credit risk, the FDIC stated that:

• financial institutions with higher concentrations of credit have "greater exposure" to market sector changes;

• competition among lenders has increased while loan growth has slowed;

• "looser" underwriting standards have resulted from market demand for higher-yielding leveraged loan and corporate bond products; and

• bank lending to nonbank financial institutions (such as private equity funds and real estate investment trusts) has expanded seven-fold since 2010.

The FDIC noted, however, that loan performance metrics are strong at FDIC-insured banks.