On October 15, 2009
Credit Quality Poses Biggest Threat to Banks
FDIC chief Sheila Bair, OCC head John Dugan and other banking regulators were on Capitol Hill yesterday to update lawmakers on the state of the industry. As their testimony makes clear, the major concern for commercial banks and thrifts today is no longer liquidity, as in the early days of the meltdown, but declining credit quality. The percentage of overdue loans has reached the highest level since the mid-1980s, during the Savings & Loan crisis. The rate at which banks are writing off loans is also accelerating. For example, net charge-offs for credit card loans rose to a record 9.9 percent in the second quarter. Meanwhile, continuing economic uncertainty is dampening new lending. Dugan highlighted a number of factors driving…
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