US regulators are asking banks for more detail on their autos financing exposure, as rapid growth in the lending has prompted officials to seek to better assess the risks, according to a person familiar with the matter.
Balances remaining on auto loans have risen by about a third since April 2011, reaching an all-time high of US$924.2 billion in August, according to credit reporting bureau Equifax.
About a fifth of the loans are subprime.
Banking regulators fear that reckless lending might be at least helping to fuel that growth, and there are early signs that delinquencies are increasing in the sector.
The Consumer Financial Protection Bureau last month said that it is taking steps to oversee auto lenders that have previously been less regulated, and companies like General Motors Financial Company Inc and Santander Consumer USA Holdings Inc earlier this year disclosed that the US Department of Justice is looking into their auto finance practices.
The person familiar with the matter said regulators are asking banks for information about not just loans they made, but financing they have provided to other lenders in the sector, such as credit lines to finance companies.
At least one regulatory agency is looking at this area and possibly others, according to the person.
The US Federal Reserve, the US Office of the Comptroller of the Currency, the US Federal Deposit Insurance Corp, and state agencies all regulate US banks.
Getting a handle on this information is difficult for regulators, but is also vital.
During the financial crisis, banks often publicly disclosed the total mortgages they held and how many of those were subprime, only to reveal months later that they had tens of billions of additional exposure from secured loans to subprime mortgage finance companies, subprime mortgage bonds that were packaged into new bonds, and so on.
These extra exposures turned what seemed like manageable problems into catastrophes that threatened the entire financial system.
Banks can have just as many different kinds of exposure to auto loans as they have to mortgages.
Wells Fargo & Co, for example, is the largest US auto lender, with US$50.8 billion outstanding at the end of last year — about US$15 billion of that was subprime.
It is also the largest underwriter of bonds backed by subprime auto loans, having sold US$3.3 billion of these securities this year, according to industry publication Asset-Backed Alert.
In addition, since 2011 Wells Fargo has extended more than US$1.5 billion of credit lines to some of the largest subprime car lenders through its Des Moines, Iowa-based subsidiary Wells Fargo Preferred Capital Inc, according to merger advisory firm Colonnade Advisors LLC.
Other banks, including Capital One Financial Corp and JPMorgan Chase & Co are also players in the business of lending to auto finance companies, according to Colonnade.
Wells Fargo declined to comment, and Chase and Capital One did not immediately comment.
“Banks are making a lot of money off these [auto] loans in many different ways,” executive director of the National Association of Consumer Advocates Ira Rheingold said.
These types of exposures are relatively small for a bank like Wells Fargo, which has US$1.5 trillion of assets, a net worth of about US$180 billion as measured by equity, and a market value of about US$264 billion.
Car loans are smaller than home loans — there is about nine times as much mortgage debt outstanding in the US as auto debt.
The loans are also shorter-lived than mortgages, meaning borrowers pay more off every year.
In addition, repossessing the collateral is much easier than for a home loan.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
Thousands of parents in Singapore are furious after a Cordlife Group Ltd (康盛人生集團), a major operator of cord blood banks in Asia, irreparably damaged their children’s samples through improper handling, with some now pursuing legal action. The ongoing case, one of the worst to hit the largely untested industry, has renewed concerns over companies marketing themselves to anxious parents with mostly unproven assurances. This has implications across the region, given Cordlife’s operations in Hong Kong, Macau, Indonesia, the Philippines and India. The parents paid for years to have their infants’ cord blood stored, with the understanding that the stem cells they contained
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day