The Financial Activities of Households, and US Financial Institutions

  Households’ financial transactions have been increasing in recent years. In the United States, the household as a fund raiser has increased borrowing in the forms of mortgages and consumer credit. Households, as asset holders, own a great deal of stocks and real estate, such as housing. The borrowing of households has become greatly affected by their asset value fluctuation, as financial instruments by which to borrow against the collateral assets held by households have become more popular in recent years.<br>  US financial institutions have been expanding their financial business in those areas that target households. Financial institutions have increased lending to households, while expanding the volume of target customers and the auspices of loan collateral. At that time, financial institutions attempted to reduce their credit risk by using securitization; however, the credit cost of US financial institutions increased rapidly during the 2008 financial crisis. In looking at its content, credit cost increased rapidly—not only with respect to mortgages, but also in other areas, such as credit cards. To date, financial institutions have applied credit risk management to each distinct loan product; however, at the time of the financial crisis, increased credit risk with respect to mortgages (i.e., due to the decrease in housing prices) also affected credit risk with respect to credit cards and other products. As such, the risk management undertaken by financial institutions—which has previously been done through the use of traditional financial instruments and business lines—may have become insufficient. Overall, I do believe that financial institutions require an integrated risk management strategy with respect to the financial transactions of households and individuals.