Credit, operational, and compliance risks are the key concerns for the federal banking system, the Office of the Comptroller of the Currency (OCC) stated in its Semiannual Risk Perspective for Fall 2017.
The report looks at risks facing national banks and federal savings associations. It presents data in four main areas: the operating environment, bank performance, trends in key risks, and supervisory actions. Using data as of June 30, 2017, the report focuses on issues that pose threats to those financial institutions regulated by the OCC.
The OCC said aggressive competition, tighter spreads, and slowing loan growth continues to influence the credit environment. These factors are resulting in incremental easing in underwriting practices and increasing concentrations in select loan portfolios. Consequently, this is leading to heightened risk should the U.S. economy weaken, or the markets tighten quickly.
Further, operational risk continues to challenge banks for several reasons. One is the increasing complexity of cybersecurity threats. Other challenges include the widespread use of third-party service providers and the increasing concentrations of third-party service providers for some critical operations.
Additionally, compliance risk is elevated as banks continue to manage money laundering risks, as well as consumer compliance risks. The latter is due to the increasing complexity of consumer compliance regulations.
The report is intended as a resource to the industry, examiners, and the public.