Understanding the Relationship Between Credit Cycles and Interest Rates

Description

Credit conditions are often indicators of banks' willingness to lend that helps sustain, inflate, or deflate economic activity. When economists discuss changes in the federal funds rate, the most discussed relationships are unemployment, gross domestic product, and inflation expectations. Credit conditions are frequently overlooked! This session evaluates the federal funds rate, lending activity, asset quality trends, and net interest margin to see how your institution could be impacted during the next rate cycle. Preparing for these inevitable changes can often be a lengthy process involving evaluating historical experiences, credit concentration migration, and loan pricing disciplines. Implementing these steps is not only a best practice, but a necessary exercise in protecting shareholder value.
 
Learning Objectives and Key Takeaways:

• How credit cycles and interest rates impact lending activity, asset quality, interest rates, margin, and ultimately, profitability.
• Where we currently are in the credit and rate cycle.
• Strategies to protect your institution from credit losses and prevent further ROA and ROE compression.

This course is part of the 2024 Financial Institutions Conference Bundle. Purchase the conference bundle here.