The Federal Deposit Insurance Corporation (FDIC) has released its 2026 Risk Review, outlining the agency’s assessment of economic conditions, financial market developments and the primary risks affecting insured depository institutions during 2025.
The annual Risk Review is intended to inform supervisory priorities by highlighting trends that may influence bank safety and soundness, with particular emphasis on funding and interest rate risk and credit risk.
The FDIC characterizes 2025 as a year of moderating economic growth, declining short‑term interest rates and improving financial market conditions, alongside generally solid banking performance. At the same time, the report emphasizes that risk exposures were uneven across institutions and portfolios, underscoring the importance of continued monitoring in select areas as banks enter 2026.
From an economic perspective, growth slowed compared to prior years, though consumer spending remained a key driver of overall activity. Labor market conditions softened as job gains moderated, while inflation eased during portions of the year but remained above the Federal Reserve’s longer‑run target. Interest rates declined across most maturities, with larger reductions at the short end of the yield curve, resulting in a meaningful steepening after a prolonged period of inversion. Financial market sentiment improved, supported by gains in equity and fixed‑income markets and stronger corporate funding conditions.
Within this environment, the banking industry reported strong earnings performance. Net income increased year over year, driven by higher net interest income and noninterest income, partially offset by higher noninterest expense. Community banks also experienced improved profitability during the year.
The FDIC describes funding and liquidity conditions as stable throughout 2025. Deposit growth was steady and led by uninsured deposits, while reliance on wholesale funding declined as banks reduced Federal Home Loan Bank advances and brokered deposits. Net interest margins improved as funding costs declined faster than asset yields, though unrealized losses on securities portfolios remained elevated relative to historical norms.
On the credit side, risks were generally contained, though the FDIC highlights continued focus on commercial real estate, nondepository financial institution (NDFI) lending and certain consumer loan segments.
Stay tuned: Schneider Downs will publish a more in‑depth summary and analysis of the FDIC’s 2026 Risk Review soon, providing a deeper review of the report’s key data, themes and supervisory focus areas.
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About Schneider Downs Financial Services
The Schneider Downs Financial Services industry group supports financial institutions as they navigate evolving risk, regulatory and governance challenges. Our professionals work with institutions to strengthen internal audit, risk advisory and related risk management programs that support sound decision-making, operational effectiveness and regulatory alignment.
Through services spanning internal audit, risk advisory, IT risk advisory, third-party risk management, fraud risk advisory and enterprise risk and compliance, we help financial institutions design and enhance resilient, risk-based programs aligned with their strategic objectives and operating environment.
To learn more, visit our Financial Services Industry Group page.
