U.S. Banking Credit Risks Intensify

Credit pressures are mounting across the U.S. banking sector as commercial real estate (CRE) delinquencies climb to a 10-year high of 1.57%, with some major banks reporting office loan defaults as high as 11%. Rising emergency borrowing from the Federal Reserve and a six-month peak in the VIX index highlight growing investor unease and tightening liquidity.

High interest rates continue to strain the CRE market, with a $1 trillion refinancing wall looming by year-end. Meanwhile, exposure to the shadow banking system has surged to $1.2 trillion, adding another layer of systemic risk. On the consumer side, credit card delinquencies have risen to 2.94%, while private credit defaults now stand at 5.5% — signaling broader credit weakness.

Technically, the sector looks fragile. Bank of America (BAC) trades near key resistance at $51.1, with an RSI of 35.6, suggesting limited upside momentum. Regional banks remain especially vulnerable, given their heavier exposure to CRE and private credit markets.

With CRE stress, consumer defaults, and shadow banking risks all mounting, bank earnings and capital buffers could face significant pressure — a crucial macro theme to monitor as the U.S. moves toward 2026.

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