U.S. Markets

Fed's Dudley warns small banks to rethink risks of higher rates

FILE PHOTO: William C. Dudley, President of the Federal Reserve Bank of New York, attends a conference about trade and globalization at the central bank of Brazil headquarters in Sao Paulo, Brazil, March 1, 2018. REUTERS/Nacho Doce/File Photo

NEW YORK (Reuters) - Some community banks have ramped up investments that could pose risks as interest rates rise, so they should evaluate their portfolios now that U.S. policy is tightening, Federal Reserve Bank of New York President William Dudley said on Wednesday.

“We have observed that some community banks have taken on more interest-rate risk by increasing the maturity of their assets and the average duration of their loan portfolios,” he said in prepared remarks to a banking conference.

“It will be important for community banks that are very sensitive to interest rate risk to evaluate the risk management of their loan portfolios,” Dudley added.

Reporting by Jonathan Spicer