Neither the central bank’s gradual raising of interest rates, nor its modest changes to capital rules are likely to meaningfully increase risk to the financial system.
Banks reported $6.4 billion in trading revenue in the third quarter, down 3.6% from the previous quarter, on falling interest rate and foreign exchange revenue, the Office of the Comptroller of the Currency said.
Banks are swapping out long-term holdings for short-term securities to manage interest rate risk. But in the process, they are sacrificing yield — and ammo they might need to pay more for deposits to retain customers.
In a sign of broader competition ahead, bigger banks are raising the interest they pay on deposits held by business customers. The big question is how hard will it be for banks to maintain margins and to stave off consumer demands for better rates.
Simultaneous spikes in home prices and mortgage rates have put an unusual squeeze on borrowers' purchasing power and require lenders to be proactive about protecting their loan pipelines.
