OCC Report Examines Key Risks for the Federal Banking System
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.
Related Links
Keywords: Americas, US, Banking, Semiannual Risk Perspective, Credit Risk, Operational Risk, Concentration Risk, Compliance Risk, OCC
Previous Article
CFTC Publishes Amendments to Margin Requirements for Uncleared SwapsRelated Articles
EC Adopts Financial Reporting Changes Arising from Benchmark Reforms
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HMT Updates List of Post-Brexit Equivalence Decisions in UK
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.
EBA Issues Erratum for Technical Package on Reporting Framework 3.0
EBA published an erratum for technical package on phase 1 of the reporting framework 3.0.
APRA Publishes FAQ on Measurement of Credit Risk Weighted Assets
APRA updated a frequently asked question (FAQ), for authorized deposit-taking institutions, on the measurement of credit risk weighted assets.
EBA Publishes Risk Dashboard for Third Quarter of 2020
EBA published the quarterly risk dashboard, along with the results of the Risk Assessment Questionnaire survey among 60 banks and 15 market analysts.
ECB Analysis Shows Privacy as Biggest Concern in Use of Digital Euro
ECB concluded the public consultation on the introduction of a digital euro in EU.
ECB Finalizes Guide on Supervisory Approach to Bank Consolidation
ECB published a guide that sets out the supervisory approach to consolidation in the banking sector.
SRB Chair Outlines Work Priorities for 2021
The SRB Chair Elke König published an article setting out work priorities for 2021.
FDIC Selects Companies to Compete in Final Phase of Tech Sprint
FDIC has selected 11 technology companies—including BearingPoint, Fed Reporter, Inc, and S&P Global Market Intelligence, LLC—for inclusion in the third and final phase of the rapid prototyping competition.