Defaults, reduced growth and less lending ahead, Fed says

Recent bank failures were caused by poor risk management, report finds

US Federal Reserve, Washington, DC
US Federal Reserve, Washington, DC

Contracting credit could slow down economic activity and cause rising defaults by non-financial firms, the Federal Reserve warned in its latest financial stability report.

The report acknowledged the failure of several mid-sized US banks and noted some lenders “continued to experience stress”. It added: “These developments may weigh on credit conditions going forward.”

The report was published alongside the April 2023 Senior Loan Officer Opinion Survey. Commercial banks expect to tighten loan

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