FEDERAL DEPOSIT INSURANCE CORPORATION 

2019 Risk Review 

Division of Insurance and Research 

October 10, 2019 
 

DEPOSIT INSURANCE CORPORATION 

FEDERAL DEPOSIT INSURANCE CORPORATION 

Risk Review Summary 

 Section I: 

Executive Summary 

 Section II: 

U.S. Economy, Financial 

Markets, and Banking 

Industry Overview 

 Section III: 

Key Bank Risk Issues 

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FEDERAL DEPOSIT INSURANCE CORPORATION 

Topics Covered 

Credit Risk 

Agriculture 

Commercial Real Estate 

Leveraged Lending and Corporate Debt 

Market Risk 

Interest Rate Risk and Deposit Competition 

Liquidity 

3 
 

on I IE 0 1111 L - ndln 

Do onm 141 nk w.lilli t 

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•• • 

• II • ti ,. 

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OIC 

FEDERAL DEPOSIT INSURANCE CORPORATION 

Agriculture: Exposure 

4 
 

8 

Net Farm lncomie Is Expected to Remain Below the Historical 

Average in 2019 

Net Farm Income, Billions of Heal U.S. Dollars 

140 

- 120 -

100 -

- 80 

- 60 

40 

20 

0 -

- - 25-Year Average 

- - -

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 

Source: U.S. Department of Agriculture 

Notes: Dollar values are adj usted for inflation. F indicates forecast. 

FEDERAL DEPOSIT INSURANCE CORPORATION 

Agriculture: Risk 

5 
 

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FEDERAL DEPOSIT INSURANCE CORPORATION 

Commercial Real Estate: 

Exposure 

6 
 

10 

CRE Lending at FDIC-Insured lnstitutions Continues to Grow 

Billlio ns of Dollars 

3 000 

2 ,500 

2 ,000 

1,500 

1,000 

500 

0 

2007 2009 2011 2013 

Source: FDIC 

Note: Data as of first quarter of each year. 

2015 2017 2019 

■ Unsecured CRE 

Multifamily 

■ Total Nonfarm 

Non re sidentia I 

■ Acquisition, 

Deve'llopment, & 

Constructlon 

FEDERAL DEPOSIT INSURANCE CORPORATION 

Commercial Real Estate: Risk 

7 
 

rt :16, 

N,onfinancial Cor1piorate Debt .. t,o GDP Is Elevated, Driven by an Increase 

·n Cor -orate Bonds 

Debt-to-GDP Ratio, Percent 

50 

45 

40 

35 

30 

25 

20 

15 

10 

5 

0 

■ Mortgages 

Other Loans 

■ Depositoiy llnstirtution Loans 

■ iQorpor,ate Bonds, 

■ Municipal Securities 

■ 1Commercial Pa1per 

1951 19-56 1961 1966 1971 1976 1981 1986 1991 1996 200 . 2006 .201 2016 

Sources: Fed rail Res,erv Board an Bureau ,of 15conomic Ana ys s (Haver Analytics) 

FEDERAL DEPOSIT INSURANCE CORPORATION 

Leveraged Lending and 

Corporate Debt 

8 
 

19 

Deposit Composition Is Just Beginning to Shift Back Toward 

Interest-Bearing Balances, Despite Years of Interest Rate Increases 

Noninterest-Bearing Deposits to Assets, Percent 

25 

20 

5 

0 

5 

0 

- Community Banks 

Noncommunity Banks 

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019' 

Sources: FDIC and Federal Reserve of St. Louis 

Note: Quarterly data through first quarter 2019. 

FEDERAL DEPOSIT INSURANCE CORPORATION 

Interest Rate Risk and Deposit 

Competition 

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23 

Over the Past Six Years- Short-Term Liquidity Positions Declined While 

Reliance on Wholesale Fuinding Increased 

FDilC~lnsmed Institutions w,itll'I lota' Assets Under $100 B Ilion 

Percent of Total Assets. 

16 

14 

12 

10 

8 

6 

4 

2 

15.0 

- Uquld Assets 

Wholesale Fo 111. ing 

9.7 

O -t--.,---,---,--,.---.--...--,---,--..,....-,----,--..,....-,---,---,--.--.---,--, 

2001 2003 2005 2007 2009 20:11 2013 2015 2017 2019 

Sources: FDIC and U.S. Federal R,eserve 

Notes: Recessions shaded. Annual data as of ·first uarte . 

FEDERAL DEPOSIT INSURANCE CORPORATION 

Liquidity 

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FEDERAL DEPOSIT INSURANCE CORPORATION 

Next Steps 

 Plan to publish Risk Review at least 

annually 

 Feedback is encouraged 

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