Curry Comments on Auto Credit Risk, Basel IRR Proposal

Comptroller of the Currency Tom Curry in a speech today expressed concern about growing credit risk in auto loans, noting relaxed underwriting standards and the fact that 30 percent of new vehicle loans now have maturities of more than six years. “What is happening in this space today reminds me of what happened in mortgage-backed securities in the run up to the crisis,” he said, “Although delinquency and losses are currently low, it doesn’t require great foresight to see that this may not last.”

Curry also commented on the Basel Committee on Banking Supervision’s proposal on interest rate risk in the banking book. He said that like ABA, the federal banking agencies are opposed to a regulatory approach to interest rate risk capital, instead preferring that IRR be managed through supervisory oversight. Curry’s comments were provided in a response to a question by ABA’s Wayne Abernathy following the speech.

The Basel proposal put forth two approaches to a capital requirement, both of which relied on a flawed measurement of interest rate risk. In a September comment letter, ABA urged the committee to consider the United States’ history of effective interest rate risk management – achieved in part through a flexible supervisory approach that considers factors such as the size of the bank and the complexity of its activities.