Fed Gov. Duke: Economy's Effects on Banks Vary
Banks remain important financial conduits in today's economy, despite the rise of other funding sources, Federal Reserve Gov. Elizabeth Duke said in a recent speech in Charlotte, N.C., adding that the recession and turbulent financial market conditions are affecting different types of banks in various ways.
In remarks at the University of North Carolina Banking Institute, Duke noted that while the nation's largest banks have reduced lending, smaller banks as a group have actually been expanding their loan portfolios.
Looking beyond the headlines
However, bank holding companies outside the top 25 increased their lending in the fourth quarter by about 5 percent. "This loan growth may reflect that smaller banks in strong financial condition are finding that they can gain creditworthy customers—even in the current economic environment—as other banks cut back on lending to conserve capital and liquidity," Duke said. "Smaller banks may also be finding opportunities to reclaim consumer and business customers from nonbank competitors who have pulled back as the securitization markets have dried up."
A larger piece of the pie for smaller organizations
"There are many types of banks in the United States, and the extraordinary stress in the financial system, the downturn in the U.S. and global economies, and the associated reductions in asset values have affected each bank differently," Duke said. "As such, some banks have likely fulfilled the credit needs of consumers and businesses that had been turned away by their peers."
April 27, 2009