The Office of the Comptroller of the Currency (OCC) recently released a report examining the COVID-19 pandemic’s impact on the federal banking system and highlighting various risks.
The Semiannual Risk Perspective for Spring 2021 highlighted credit, strategic, operational, and compliance risks among the prime themes, noting banks maintained solid capital and liquidity levels, but profitability continues to be stressed because of low-interest rates and decreased loan growth.
The analysis showed, per the OCC, credit risk is elevated and transitioning amid the current economic downturn – which plays a role in some borrowers’ ability to service debts; assistance programs and federal, state, and local stimulus programs have suppressed past-due levels; and strategic risks associated with banks’ management of Net Interest Margin (NIM) compression and efforts to improve earnings is on the rise.
The findings are based on Dec. 31, 2020, data. The report presents information about the operating environment, bank performance, special topics in emerging risk, trends in key risks, and supervisory actions.
Additionally, authorities noted the report focuses on issues posing threats to financial institutions subject to OCC regulations and seeks to serve as a resource to the industry, examiners, and the public.