Similarly, delinquency rates on residential mortgages held by banks declined in 2002, and charge-off rates on these loans remained near zero. Delinquency rates on credit card loans were flat in 2002, but remain fairly elevated, partly because of the expansion of subprime lending discussed earlier.
Overall, the ratio of banks' bad-loan reserves to delinquent loans remains high, reflecting strong earnings that have allowed banks to step up their rate of provisioning for future defaults. Moreover, banks' ample capital provides a further important cushion against possible losses.