WASHINGTON — The Office of the Comptroller of the Currency is worried about small banks that have responded to the steady decline in core deposits by loading up on wholesale money and funneling it into commercial loans.

Poring over data from 2,000 banks with less than $1 billion of assets, Deputy Comptroller Nancy Wentzler concluded that institutions that are heavily reliant on wholesale funds also have higher interest rate and credit risk. “Banks with a high dependence on wholesale funding also generally have higher-risk assets,” Ms. Wentzler said in an interview Friday. “Those banks need to be very careful with the management of liabilities and with asset management. They have a dual responsibility to keep an eye on both sides of the ledger.”

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.