A bank’s risk tolerance and risk diversification policies should drive portfolio limits. Well established policies and procedures can help maintain controls over concentrations and help produce the desired mix of the loan portfolio.

Read More

Just as many banks have finally stabilized their credit portfolios after the mortgage crisis, a new threat looms. Many of the home equity lines of credit (HELOCs) that accompanied the housing boom are set to transition from the draw to the repayment period over the next three years, which could cause significant heartburn for banks and borrowers alike. The fallout for banks will depend on the size of their HELOC portfolios with nearing end-of-draw dates and the financial condition of their HELOC borrowers.

Read More

The warning bells throughout 2014 of a multi-family lending bubble have so far failed to come to fruition. That doesn’t mean, however, that the risk doesn’t still exist. While the Federal Reserve Board of Governors has indicated in each of its 2015 Beige Books that this particular CRE sector is still experiencing stable to strong growth in most of its districts, the law of supply and demand tells us that eventually this brisk pace will slow.

Read More

In March 2013, the OCC, FRB, and FDIC jointly issued guidance on leveraged lending to replace guidance in place since 2001. Leveraged loans were defined as loans with significant financial leverage that are not asset-based loans (i.e., reliance on enterprise value). The guidance required banks to identify leveraged loans at inception and in their portfolios, track their exposure to leveraged loans, and adhere to certain standards in underwriting, risk rating, and portfolio management for such loans.

Read More

In March 2015, the Federal Reserve reported that the nation’s largest banks fared well during their annual stress tests and earned passing grades. Although federal regulations require the largest banks to undergo these tests, stress testing has become a best practice and an essential component of institutions’ risk management strategies regardless of size.

Read More