Auto Loan Risk Worries U.S. Comptroller
Easier credit standards and a high concentration of auto loans at banks have the Office of the Comptroller of the Currency increasing its “focus” on auto finance in 2016 as a potential source of risk to the financial system overall.
“Underwriting practices and weak loan structures in auto lending are most concerning in banks with high concentrations of auto loans,” the regulator said in its Semiannual Risk Perspective report issued in December.
“Strong auto loan growth alone does not pose systemic risk; however, the level of concentrations and rate of growth at individual banks are an increasing focus for the OCC,” the report said.
According to the OCC, banks with annual auto loan growth rates of more than 10% accounted for around 25% of all banks in 2015, up from 10% in 2012.
“Banks are easing underwriting standards across a variety of credit products because of competitive
pressures. Easing standards are particularly evident in indirect auto and leveraged lending,” the report said.
The OCC also cited easier underwriting and increased risk in commercial and industrial loans, asset-based lending, and commercial real estate.
