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Asset quality is certainly a key area of concern in the banking sector today.
While commercial asset quality has been a high-profile problem for banks, during the last nine months, there have been signs that credit quality on the consumer side is weakening. It may be a more prominent problem as we move through 2001, and may compound the problems we ve seen on the commercial side of the business. In combination, these two things mean increasing credit costs that could put pressure on bank earnings. Offsetting this somewhat are Fed easing and less intense competition in some places for loans, which has led to widening margins. Fed policy is certainly helping in the short term.