TAILIEUCHUNG - Semiannual Risk Perspective From the National Risk Committee

After analyzing the simple monetary model, we move on to the full monetary model of Christiano, Motto and Rostagno (2006). That model incorporates a banking sector and the financial frictions in Bernanke, Gertler and Gilchrist (1999). This model is interesting for two reasons. First, we use the model to investigate the robustness of our findings for boom-busts. We feed the model the same signal about future technology that turns out to be false that we fed to our real business cycle and simple monetary models. We find that the full and simple monetary models behave quite similarly. The second reason it is interesting to study boom-bust episodes. | Comptroller of the Currency Administrator of National Banks US Department of the Treasury Semiannual Risk Perspective From the National Risk Committee Office of the Comptroller of the Currency Washington . Spring 2012 Semiannual Risk Perspective Spring 2012 Contents About This Executive Key Risk Part I Operating Slow Economic Recovery Likely to Remain a Drag on Loan Corporate Balance Sheets Exceptionally Housing Market Remains Commercial Real Estate Vacancy Rates Improving but Remain Corporate Default Rate Treasury Yields Remain Historically Part II Condition and Performance of A. Profitability and Revenues Improving Bank Profitability Return on Equity Improving Fewer Banks Report Net Interest Margins Remain Under Non-interest Income Declining for Large and Small Trading Revenues B. Credit Quality Real Estate Related Loans Still Credit Cycle Improvement Pronounced at the Largest Charge-Off Rates Remain Commercial Real Estate Charge-Off Rates Commercial Real Estate Noncurrent Loan Rates Commercial Real Estate Concentrations Remain Residential Real Estate Leads Decline in Consumer Credit Mortgage Performance Remains Distorted by Foreclosure Home Equity Risk May Escalate in the Next Few Commercial Loan Performance Commercial and Industrial Loans Showing Modest - 2 - Semiannual Risk Perspective Spring 2012 Commercial and Industrial Loan Underwriting Standards Commercial Loan Rate Spreads Leveraged Loan Multiples Leveraged Loan Underwriting Part III Funding Liquidity and Interest Rate Deposits Increase as Commercial and Consumer Clients Equity Capital Increasing Relative to Total Median Tier 1

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