'ViewPoint' shines spotlight on interest rate risk, commercial real estate
Despite some emerging positive trends, "the overall environment will continue to be stressed for some time," notes Michael Johnson, senior vice president in the Atlanta Fed's Supervision and Regulation Department, in the third-quarter edition of "ViewPoint," a digest of southeastern banking conditions featured in Financial Update. U.S. economic challenges, the ongoing European debt crisis, and resulting volatility are creating turmoil and an uncertain environment for financial institutions. And this uncertainty comes at a time when southeastern banks are generally showing signs of stabilization and, in some cases, improvement.
As banks begin to shift more of their attention to profitability and capital building, they are doing so in an environment of anemic loan demand, heightened competition for quality loans, and historically low interest rates, creating a strong temptation to overreach for yield and perhaps incur an undesirable level of risk.
Reflecting the importance of this topic, the third-quarter edition of "ViewPoint" features a special spotlight on interest rate yields. The spotlight urges financial institutions to actively measure, monitor, and control interest rate risk. As the author, assistant vice president John Kolb, concludes, "if anything has been learned over the recent past, it is that markets are unpredictable and that events that seem unlikely can actually occur."
In addition, the latest "ViewPoint" also includes a spotlight section on commercial real estate—a market that plays a significant role in bank performance in the region. To learn more about banking conditions in the Southeast, read the full edition of "ViewPoint," featured in the third-quarter issue of Financial Update.