MAJORITY OF BANK RISK MANAGERS ARE WORRIED ABOUT THE WEALTH GAP / THE WALL STREET JOURNAL

October 23, 2014, 7:54 AM ET

Majority of Bank Risk Managers Are Worried About the Wealth Gap

By Nick Timiraos

A majority of risk managers at North American financial institutions are worried that the growing wealth gap poses a risk to the financial system.

The Professional Risk Managers’ International Association and FICO, the credit analytics firm, polled bank risk managers on the consequences of inequality during their quarterly survey. It showed that more than 62% believe the wealth gap could undermine the North American financial system. Just 14% said they didn’t think it posed a threat.

The survey found that 41%, a plurality, of bank risk managers believe unemployment or underemployment is the greatest risk to consumers’ credit health over the coming six months. Some 22% were more worried about rising consumer indebtedness. Other concerns, including a sudden financial-system shock (16%), rising interest rates (12%) and the weakening of the housing market (8%), drew less consensus.

Home loans were the only asset class where a majority of risk managers didn’t see supply meeting demand. More than one quarter of those surveyed see the supply of mortgage credit falling short of demand, the highest of any consumer borrowing category.