However, as experience has amply demonstrated, large and growing asset concentrations such as we are seeing today in some banks can adversely affect banks' earnings and capital, and indeed banks' safety and soundness, if not properly managed.
For that reason, prudent banks have long understood the importance of managing credit concentration risks - it is one of the basic tenets of banking that the Federal Reserve has long emphasized. So what exactly are concentrations of credit and what risks do they pose to institutions?