Originally Posted by Danmar
interest rate risk is one of the risks banks must manage every day. When I was employed this was one of my responsibilities. Metrics and control processes are well understood and managed at least at larger institutions. (My employer was very large). So I wouldn't worry about the bigger guys. The smaller banks are not as sophisticated but I suspect the regulators would be all over them. the S&L crises was caused to a large extent by interest rate risk and has been a focus ever since. Not many S&L's left anyway. Bottom line is I would be surprised if this became a significant issue.
The most recent crises was more of a liquidity issue. Again, although not as well controlled as interest rate risk, liquidity risk is now much better understood and controlled and has become a focus of regulators
Yes, they are regulated and have checks and balances. But somehow they still seem to manage to fail.
No one really knows the state of some of those banks since the meltdown. Many are still in a weakened state. Some have held on so far and not been taken over... but how strong are they and what would it take to sink them?
I am sure many of those banks that are holding defaulted loans and loans about to default, that they are looking at any way the can to get a bigger spread!