OCC published the Semiannual Risk Perspective for Fall 2018. OCC reported credit, operational, compliance, and interest rate risks to be the key themes for the federal banking system.
The report addresses key issues facing banks, focusing on those that pose threats to the safety and soundness of banks and their compliance with applicable laws and regulations. It presents data in five main areas: the operating environment, bank performance, special topics in emerging risks, trends in key risks, and supervisory actions. The report focuses on issues that pose threats to those financial institutions regulated by OCC and is intended as a resource to the industry, examiners, and the public. The following are the key highlights from the report:
- Credit quality remains strong, but OCC is monitoring the origination quality of new loans, the potential for increased lender complacency within credit risk identification and management, and the potential embedded risks from successive years of eased underwriting.
- Operational risk is elevated as banks respond to an evolving and increasingly complex operating environment.
- Compliance risk is elevated as banks manage money laundering risks and comply with amended consumer protection requirements.
- Rising interest rates and increased competition for deposits may result in changes in funding mix or costs.
The report also highlights the emerging risk posed by the growth in nonfinancial corporate debt and includes a credit underwriting assessment supplement. Other issues that warrant awareness among bankers and examiners include incremental easing in commercial credit underwriting practices; concentrations of commercial real estate (CRE) and the need for sound concentration risk management; and CECL implementation, which may pose operational and strategic risk to some banks when measuring and assessing the collectability of financial assets. The Fall 2018 report reflects bank data as of June 30, 2018.
Keywords: Americas, US, Banking, Semiannual Risk Perspective, Credit Risk, Operational Risk, Concentration Risk, Compliance Risk, OCC
FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).
BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.
FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.
EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.
ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.
PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).
US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).
US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.