...Rates Have Not Budged: In 2009, the Fed Funds target rate, which is one of the benchmarks used to determine borrowing costs within the U.S. banking system, reached its lowest level ever, at a range of 0.00%0.25%. The Federal Open Market Committee (FOMC) has not increased the rate since then. Fitch notes that this is by far the longest period the FOMC has gone without moving the Fed Funds rate (up or down) since its inception. Adverse Impact on Bank Margins: Given the protracted, unprecedented period of low interest rates, industry margins continue to compress as higher yielding assets run off balance sheets and are replaced by lower yielding assets, while funding costs have essentially leveled off at historically low levels. Bank margins fell to 3.02% at 1Q15, the lowest average net interest margin (NIM) since 1984, according to the FDIC. Efficiencies to Remain a Focus: With the Fed's decision last month to maintain a target range of 0% to 0.25%, Fitch believes the banking industry will...
