Rising Credit Risk on Regulatory Radar

Regulatory agencies are focused on the growth of credit risk outside the banking industry, according to remarks by top officials at the American Bankers Association’s Washington Summit today. Morris Morgan—senior deputy comptroller and COO at the OCC—noted that consumer debt levels and leveraged lending are at pre-crisis highs, while corporate debt is growing, signs of “insatiable appetite for credit risk in the marketplace—and more and more of that credit risk is outside of banks.”

Noting that growing credit risk outside the insured depository sector is less transparent and harder for supervisors to monitor, Morgan said OCC examiners are having conversations with bankers to gauge their appetite for taking on additional credit risk. Doreen Eberley, director of risk management supervision at the FDIC, echoed Morgan’s remarks.

Eberley, along with Jennifer Burns, deputy director of supervision and regulation at the Federal Reserve, also described the work their agencies are doing to reduce regulatory burden and tailor rules to banks’ business models, which has been a longstanding priority for ABA.