The U.S. Office of the Comptroller of the Currency (OCC) released its Semiannual Risk Perspective for Fall 2022, highlighting some key issues facing the federal banking system.
While economic growth slowed sharply in 2022, high employment rates supported consumer spending and overall bank performance. As a result, banks remain well capitalized with ample liquidity and sound credit quality. However, the report points out that macroeconomic headwinds remain a concern.
Among the challenges, the report said that bank investment portfolios have been adversely impacted by the rising rate environment, which has resulted in portfolio depreciation. Further, operational risk is elevated as cyber threats targeted the industry continue to evolve. In addition, compliance risk is also elevated as banks operate in an increasingly complex environment that includes significant regulatory changes.
The better news is that the quantity of credit risk in commercial and retail loan portfolios is moderate. And while loan portfolio performance has been resilient, signs of potential weakening in some segments warrant careful monitoring. The report also highlighted the OCC’s initiative on climate-related financial risks to the federal banking system, as well as the OCC’s cautious approach to crypto assets.
The report covers risks facing national banks, federal savings associations, and federal branches and agencies based on data as of June 30.
Information is presented in five main areas: the operating environment, bank performance, emerging risks relating to crypto-assets, trends in key risks, and supervisory actions.
The report focuses on issues that threaten financial institutions regulated by the OCC. It is intended as a resource for the industry, examiners, and the public.