Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

U.S. Banks Face Interest-Rate Shocks as Economy Mends, OCC Says

The biggest U.S. banks will face interest-rate shocks to their already tight margins in coming years, according to a report from the U.S. Office of the Comptroller of the Currency.

The financial firms can’t be sure what impact the dragged-out period of near-zero short-term rates will have on deposit products until it ends, the OCC said in a report today on risks to the banking industry. It also said future rate jumps could drop the value of the companies’ mortgage securities. With limited loan growth, the banks will struggle to improve net interest margins in the near term, it said.

“After three consecutive years of record low interest rates, banks are unlikely to realize further benefits from lower funding costs,” the OCC said in the report, adding that a return of interest income from future loan growth could be squeezed by higher funding costs.

The regulator of national banks such as those owned by JPMorgan Chase & Co. and Bank of America Corp. reported a slowly improving banking industry that still faces many of the same risks it did in its first such report six months ago. The number of banks with the lowest supervisory ratings has continued to drop, partially because the worst of them have failed, the OCC said, and enforcement actions have declined -- even as the agency hit HSBC Holdings Plc with a $500 million money-laundering penalty last week, the largest in OCC history.

In the search for new ways to expand lending, the agency cautioned that big banks’ underwriting standards have eroded for such products as leveraged loans over the previous 18 months, and “yields on high-risk assets are at record lows, with risk continuing to rise.”

Future compliance costs and the continuing fallout from compliance failures are also reducing profitability, the report said.

“They face fundamental changes in their business models as a result of weakening revenue growth, including shifts in the role of trading, securitization, and consumer fee income,” the report said of the big banks.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.