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US regulators eye next trouble spots

(WASHINGTON) US regulators are watching credit cards and commercial construction loans for signs they may be the next trouble spots as strained financial markets constrain credit.

The housing downturn, with its epicentre in the sub-prime mortgage market, remained atop the list of concerns. But banking regulators and Federal Reserve officials expressed concerns on Tuesday that credit risks may extend beyond mortgages.

Federal Reserve chairman Ben Bernanke warned in a speech that mortgage delinquencies and foreclosures would likely rise and more house price declines could be expected.

Mr Bernanke’s second-in-command, Donald Kohn, said at a Senate Banking Committee hearing that the Fed was also keeping a close eye on credit card, home equity and commercial real estate loans as banks cope with a widening range of credit risks.

‘Federal Reserve supervisors are monitoring these consumer loan segments for signs of spillover from residential mortgage problems, particularly in regions showing homeowner distress, and are paying particular attention to the securitisation market for credit card loans,’ he revealed. Mr Kohn added that commercial real estate is ‘another area that requires close supervisory attention’.

Source: Reuters (Business Times 6 Mar 08)

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