Safety and soundness rule puts nonmaterial risk onus on banks

This regulatory shift from the OCC and FDIC changes how banks manage risk. For retailers and merchants, this is an early warning sign of a potential tightening in the credit market. The new rule moves away from 'soft' warnings. Instead, regulators will now use formal supervisory actions more aggressively when they spot risks, even if those risks aren't currently 'material' or platform-breaking. What does this mean for your business? The banks that provide the capital for your consumer financing programs are now under immense pressure to prove they can manage downside risk without help from regulators. When banks feel this kind of pressure, they often become more conservative. You may see lenders tightening their credit boxes or becoming more selective about the industries they support. If your financing partner feels they are at risk of a formal regulatory 'mark,' they might adjust their risk appetite quickly to stay in flavor with the FDIC. Now is the time to ensure you have a secondary or tertiary lending partner in place to avoid disruptions if your primary lender reacts to these stricter safety and soundness standards.

Source: American Banker — Top News

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