Banking Regulator: US Banks Facing ‘False Sense of Comfort’

It has been just revealed that the US banking regulator said that the banks in the United stated are facing a false sense of comfort now. Check out the latest reports below.

Acting Comptroller of the Currency Michael J. Hsu just issued a fresh warning about potential risks to the US banking system.

In a new statement from the Office of the Comptroller of the Currency (OCC), Hsu says that banks should be “on the balls of their feet” with regard to risk management as credit markets begin to weaken.

Hsu said the following:

“This means banks should be:

guarding against a false sense of comfort from the recent relative stability in bank markets and from the benign credit performance data over the course of the pandemic,
re-evaluating exposures, especially asset and liability concentrations, across a range of scenarios,
taking actions to preserve capital and maintain strong liquidity consistent with each bank’s risk profile,
maintaining discipline and strong risk management across all risk areas, not just in response to headlines, and
preparing to communicate clearly, credibly, and promptly about their condition and risk profile should questions arise from customers, investors, depositors, and other stakeholders.”

It is also important to note the fact that Hsu also served on the Federal Reserve Board of Governors, saying signs of stress are appearing in credit markets, particularly commercial real estate.

According to analysts at Morgan Stanley, American banks could possibly lose almost $500 billion as a result of the US Treasury’s upcoming plan to introduce a new set of T-bills.

CNBC reports that Morgan Stanley predicts a total of $1.364 trillion of net T-bill issuance for the remainder of this year, with $1 trillion of that to be issued within the next four months alone.

The bank warns that this new wave of US bonds may put considerable strain on banks that cannot match the yields offered by the government.

Analyst Betsy Graseck stated the following as per the online publication the Daily Hodl:

“Our fixed income team sees most of this initial [Treasury General Account] restocking to come from bank reserves, suggesting ~$450b of gross outflows over the next four months.”