U.S. regulators warn banks on interest rate risk - with perhaps 6 months lead time.

[JohnWxy]

http://www.reuters.com/article/idUSTRE6065MK20100107

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Banks have generated billions of dollars of profits by borrowing at low short-term rates and investing in higher-yielding long-term assets like Treasuries.

The statement from a group of regulatory bodies known as the Federal Financial Institutions Examination Council cautioned that rising rates could squeeze profits from that trade.

The statement implies that regulators are pressing banks to fix their balance sheets and get ready to stand on their own as the government and the Federal Reserve get ready to slowly reduce their extraordinary support for the banking system.

Most analysts do not expect the Federal Reserve to raise interest rates until the second half of 2010.

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