U.S. regulators warn banks on interest rate risk
By Chief Pistol Packin' Mama on January 11, 2010 in Indicators of need for prepsWASHINGTON (Reuters) – U.S. regulators on Thursday urged banks to protect themselves against hikes in interest rates, which could threaten the easy earnings that have helped heal the banking system during the credit crunch.
Banks have generated billions of dollars of profits by borrowing at low short-term rates and investing in higher-yielding long-term assets like Treasuries.
The statement from a group of regulatory bodies known as the Federal Financial Institutions Examination Council cautioned that rising rates could squeeze profits from that trade.
