Fed releases its Audit and Regulatory Report

The report emphasized that the US banking system is robust and resilient with strong capital and liquidity, and the recent stress in the industry shows that the Fed needs to be careful in assessing and responding to risks.

In the report, which pointed out that the recent bankruptcies of three banks in the country also revealed the distribution of fund resources and the mismanagement of interest rate risks, it was reminded that the fair values ​​of investment securities decreased significantly as interest rates increased.

In the report, it was noted that deposit costs have risen from low to high levels, and companies have turned to borrowing to meet their funding needs, and that the default rates for some loan segments have risen from low levels in recent years.

In the report, which stated that banks increased their provisions for loan losses in anticipation of deterioration in asset quality, it was emphasized that supervisors doubled their efforts to assess banks’ credit, liquidity and interest rate risk preparations.

The report said that Fed supervisors have begun to prepare for the escalation of a more challenging economic environment for banks over the past year, with supervisors focusing on assessing firms’ ability to manage liquidity-related risks.

Additional examinations were made to assess interest rate risks.

The report noted that supervisors also undertake additional reviews to assess interest rate risks and the impact on firms’ funding options.

The report pointed out that Fed supervisors have stepped up their efforts to assess banks’ credit risk exposure, with a particular focus on commercial real estate loans from regional and community banks.

The report, which provides an overview of the financial situation of the banking sector, also provided information on the Fed’s recent regulatory policy efforts and current supervisory programs and priorities.