Most bankers see inflation, policy uncertainty and commercial and residential real estate as their top financial liabilities, according to the Federal Reserve’s semiannual Financial Stability Report.
According to the April 19 report, 72 percent of respondents cited persistent inflation as a risk to the financial system, unchanged from October.
Sixty percent listed policy uncertainty, up from only 24 percent six months ago. Numerous regulations have been finalized since last fall. That includes an update to the Community Reinvestment Act requiring banks with more than $2 billion in assets to comply with the same CRA evaluation standards as the largest banks. An injunction has since been announced against the rule, which federal regulators appealed last week. In March, regulators delayed the provisions covering where banks are evaluated until 2026.
The CFPB has also proposed overhauling how banks and credit unions with more than $10 billion in assets determine overdraft expenses, and released a final rule capping consumer credit card fees at $8 per incident.
Fifty-six percent cited commercial and residential real estate as a risk, down from 72 percent last fall. Forty-four percent said stress in the banking sector is a risk, compared with 56 percent from October. Forty percent listed fiscal debt sustainability, down from 44 percent.
Bank profitability has remained strong over the past two years despite high interest rates, according to the Federal Reserve. “The banking sector remained sound and resilient overall, and most banks continued to report capital levels well above regulatory requirements,” according to the report. “Nevertheless, fair value losses on fixed-rate assets remained sizable for some banks, and some banks with concentrated exposure to loans backed by commercial real estate properties experienced stress.”