US Banks Preparing for Possible Loan Deterioration, Fed Says

US banks increased credit loss provisions in the first half of the year in anticipation of loan deterioration and have started to make other moves to prepare for potentially weaker economic conditions, the Federal Reserve said Thursday in a semiannual report.

The banking system remained sound, with firms maintaining capital above regulatory minimums, liquidity at high levels and loan delinquencies near historical lows. But the Fed highlighted quickly changing market conditions and said increasing uncertainty about the economic outlook could “create new risks for firms to manage.”

“In response to this uncertainty, firms increased credit loss provisions during the first ...