OTS Wants Thrifts to Prepare for Rising Rates

Meanwhile, the Office of Thrift Supervision wants thrifts to prepare for rising interest rates, and the agency plans to issue new guidance to the industry soon."We are closely monitoring how thrifts transition from the current intensive 'mortgage banking' mode to a more typical lending environment," OTS Director James Gilleran told the Exchequer Club. The past few years have been a "fool's paradise" for the thrift industry, he said, with record profits and mortgage volumes "we may never see again." The OTS is monitoring interest rate risk, and there are an increasing number of institutions that exhibit IRR exposure levels that cause supervisory concern. But generally the industry is well positioned to withstand a rate rise of 100-200 basis points, he said. The OTS director also noted that thrifts have diversified into nonmortgage lending and services and increased their ability to generate noninterest income.