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Rough road ahead for banks

By David McMillin · Bankrate.com
Saturday, September 8, 2012
Posted: 6 am ET

The future for U.S. banks still looks less than perfect.

According to a new report from credit ratings agency Moody's, the US banking system will continue to face challenges over the next 12 to 18 months. The report points to a number of factors that may present problems for financial institutions, the majority of which are out of their control. A statement from Moody's senior vice president, Sean Jones, indicates that low interest rates, high unemployment, weak economic growth and the European debt crisis are some of the key potential hurdles.

The FDIC released some positive numbers for banks in its latest quarterly profile, highlighting an increase in lending and a year-over-year increase in net income. However, the Moody's report shows that financial institutions continue to face many uncertainties. With a delicate economic situation, the U.S. banking system as a whole remains in "recovery mode." In addition to challenges from the current economy, Moody's points to the lingering effects of the financial crisis that brought the banking industry to its knees just a few years ago.

We've also seen plenty of problems created by banks themselves over the past few months. From poor management that paved the way to big trading losses at JPMorgan to money laundering at HSBC, some mistakes have made big headlines and given consumers plenty of reason to worry about where the industry is headed.

While the short-term future of banks may have some hurdles, the Moody's report mentions a glimmer of hope that can help the banking industry in the event of a worst-case scenario: increased capital requirements. Thanks to post-financial crisis reforms, banks must have more money on hand to protect themselves and their depositors.

Are you worried about your bank's stability? If so, you can get a snapshot of its stability with Bankrate's Safe & Sound ratings system.

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1 Comment
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