Fed stability report: banks and households strong, but asset values are elevated
US Federal Reserve notes several signs of resilience but warns a messy Brexit, China trade tension and trouble in emerging markets could hit the US financial system
Washington — Tensions over trade, the turbulent Brexit discussions, and trouble in China and emerging markets could rock a US financial system where asset prices are elevated and business credit quality may be deteriorating, the US Federal Reserve said in a first report devoted to financial stability. The report noted several signs of resilience in the financial system to the sorts of unexpected shocks that might arise, including the strong capital position of banks, generally tempered borrowing by households, and a system less vulnerable to the sorts of runs or credit crunches that nearly shut down the global economy in the 2007 to 2009 financial crisis. But the report highlighted stock prices that are high by some measures, commercial real estates values “growing faster than rents” and the willingness of lenders to fund risky corporate loans. “Business sector debt relative to [GDP] is historically high and there are signs of deteriorating credit standards,” the Fed report stated. ...
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