Featured Product

    OCC Report Examines Key Risks for Federal Banking System

    May 20, 2019

    OCC published the Semiannual Risk Perspective for Spring 2019. The report addresses key issues facing banks, focusing on those that pose threats to the safety and soundness of banks and their compliance with the applicable laws and regulations. The report highlights key risk themes, including credit, operational, compliance, and interest rate risk, in addition to the strategic risk arising from innovations in financial technology.

    The report, which is based on data as of December 31, 2018, presents information in five main areas: the operating environment, bank performance, special topics in emerging risks, trends in key risks, and supervisory actions. It focuses on issues that pose threats to the financial institutions regulated by OCC and is intended as a resource to the industry, examiners, and the public. The report highlights that financial performance of banks making up the federal banking system strengthened in 2018. The financial services sector also continues to experience rapid growth in fintech and regtech. The following are the key highlights from the report: 

    • Credit quality remains strong. However, as per OCC, banks should have appropriate risk management practices in place in case of a potential cyclical downturn. OCC keeps reminding bankers and examiners to assess the quality and timeliness of credit risk identification, risk mitigation, and loan-loss reserve methodology.
    • Operational risk is elevated as banks adapt to a changing and increasingly complex operating environment. Key drivers for operational risk include persistent cyber-security threats, innovation in financial products and services, and increasing use of third parties to provide and support operations that are not effectively understood, implemented, and controlled.
    • Compliance risk related to Bank Secrecy Act/anti-money laundering (BSA/AML) remains high.
    • Interest rate risk and the related liquidity risk implications pose potential challenges to earnings, given the uncertain rate environment, competitive pressures, changes in technology that have made it easier for customers to move funds, and untested depositor behavior after an extended low-rate environment. 

    The special topics section in the report examines the impact of financial innovation in the elevation of strategic risk for banks. Rapid technological changes in the industry are forcing banks to reevaluate their business strategies. OCC has observed substantial variance in adoption of innovation—by technology type and by bank size—in the federal banking system. Some banks are combining resources through consortia and making other collaborative arrangements to share the cost of developing and acquiring new technologies. Others have increasingly relied on third-party service providers or fintech relationships to enable more efficient and effective operations and deliver innovative products. Still others continue to take a wait-and-see approach, though a slow-adopter strategy adds risk because the speed of change, combined with the lengthy process to evaluate and implement newer technology solutions, can result in loss of customers or market share before the bank can respond. The challenge of adapting to the current environment may prove difficult for banks lacking the financial resources to invest in technology. Yet some smaller banks looking to innovative solutions may find their business models more nimble and adaptable to collaboration with a nonbank firm to strengthen bank operations and customer acquisition.

     

    Related Links

    Keywords: Americas, US, Banking, Semiannual Risk Perspective, Credit Risk, Operational Risk, Compliance Risk, Interest Rate Risk, Fintech, Regtech, OCC

    Related Articles
    News

    MAS Concludes Blockchain Payments Prototype Shows Commercial Potential

    MAS and Temasek jointly released a report to mark the successful conclusion of the fifth and final phase of Project Ubin, which focused on building a blockchain-based multi-currency payments network prototype.

    July 13, 2020 WebPage Regulatory News
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.10

    EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.

    July 10, 2020 WebPage Regulatory News
    News

    APRA Updates Reporting Validation Rules in July 2020

    APRA updated the lists of the Direct to APRA (D2A) validation rules for authorized deposit-taking institutions, insurers, and superannuation entities.

    July 10, 2020 WebPage Regulatory News
    News

    PRA to Partly Apply EBA Guidelines on Disclosures for COVID Measures

    PRA updated the statement that provides guidance to regulated firms on implementation of the EBA guidelines on reporting and disclosure of exposures subject to measures applied in response to the COVID-19 crisis.

    July 10, 2020 WebPage Regulatory News
    News

    EBA Updates List of Correlated Currencies Under CRR

    EBA updated the 2019 list of closely correlated currencies that was originally published in December 2013.

    July 10, 2020 WebPage Regulatory News
    News

    FASB Proposes to Delay Implementation of Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).

    July 09, 2020 WebPage Regulatory News
    News

    APRA Updates Regulatory Approach to Loan Deferrals Amid COVID Crisis

    APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis.

    July 09, 2020 WebPage Regulatory News
    News

    BCBS and FSB Set Out Recommendations for Benchmark Transition

    BCBS and FSB published a report on supervisory issues associated with benchmark transition.

    July 09, 2020 WebPage Regulatory News
    News

    IAIS Sets Out Recommendations for Benchmark Transition for Insurers

    IAIS published a report on supervisory issues associated with benchmark transition from an insurance perspective.

    July 09, 2020 WebPage Regulatory News
    News

    ESMA Updates Reporting Manual on European Single Electronic Format

    ESMA updated the reporting manual on the European Single Electronic Format (ESEF).

    July 09, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5464