H.8 Assets and Liabilities of Commercial Banks in the United States as of September 2023

 The commercial banking sector is undergoing a number of significant changes, including:

• A shift towards large time deposits and borrowings as sources of funding
• A shift towards consumer loans and real estate loans as assets
• An increase in the percentage changes for consumer loans, real estate loans, large time deposits, and borrowings
• A negative percentage change for commercial and industrial loans, treasury and agency securities, and other securities

These changes have a number of potential implications, both positive and negative. On the positive side, the shift towards consumer loans and real estate loans could boost consumer spending and housing prices, which could support economic growth. On the negative side, the shift towards large time deposits and borrowings could lead to higher interest rates for borrowers and reduced availability of credit. Additionally, the shift towards consumer loans and real estate loans could increase risk to the financial system as a whole.

Here are some additional thoughts on the potential implications of the changes :

• Increased consumer spending: Consumer loans can be used to finance a variety of purchases, such as new cars, homes, and appliances. When commercial banks make more consumer loans, it can boost consumer spending and economic growth. However, it is important to note that increased consumer spending can also lead to higher inflation.
• Higher housing prices: Real estate loans are used to finance the purchase of homes and other properties. When commercial banks make more real estate loans, it can drive up housing prices. This can be good for homeowners who are looking to sell their homes, but it can make it more difficult for first-time homebuyers to afford to buy a home.
• Increased risk: Consumer loans and real estate loans can be riskier than other types of loans, such as commercial and industrial loans. This is because consumers and homeowners are more likely to default on their loans if they experience financial hardship. This could lead to losses for commercial banks and other financial institutions.
• Higher interest rates for borrowers: Commercial banks need to pay interest on their liabilities, including large time deposits and borrowings. As a result, they are likely to charge higher interest rates on loans to businesses and consumers. This could make it more expensive for businesses to invest and consumers to borrow money, which could have a negative impact on economic growth.
• Reduced availability of credit: If commercial banks are less willing to lend money, it could make it more difficult for businesses and consumers to borrow money. This could have a negative impact on economic growth.
• Increased risk to the financial system: Large time deposits and borrowings are more volatile than deposits. This means that commercial banks are more vulnerable to shocks that could lead to a decline in these sources of funding. This could have a negative impact on the financial system as a whole.