Strong capital and liquidity positions will remain important, as banks still face significant challenges—including an environment of higher-than-normal uncertainty. For instance, some sectors of commercial real estate loans and commercial and industrial loans are more vulnerable than before the crisis. Similarly, net interest margins could remain in the lower part of their historical ranges for some time.
Although losses and delinquency rates on bank loans are currently low, performance could deteriorate as borrowers exit forbearance, with particularly hard-hit businesses and households facing arrears on rent and mortgage payments. 13 Recent developments have been encouraging, but downside risks remain, which could delay recovery and lead to higher losses.