The resulting increase in long-term interest rates pushes up the pricing of bank loans, ultimately increasing lending rates for firms and households. In addition, the higher yields on bonds increase their attractiveness as an investment for banks, reducing their incentives to supply loans.
Testing the adequacy of risk management and internal control helps us understand the financial condition of the consolidated organization and the potential impact of consolidated risk management policies and internal controls on the operations of the insured depository institution. To implement this approach, the Federal Reserve last year began assigning a formal rating to risk management in our holding company and bank examination reports.