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

    APRA Plans to Assess Climate Risks and Develop Prudential Guidance

    APRA published a letter that outlines its plans to undertake a climate change vulnerability assessment and develop a prudential practice guide focused on climate-related financial risks.

    February 24, 2020 WebPage Regulatory News
    News

    FDIC Publishes Guide to Help with Third-Party Risk Management

    The technology lab of FDIC (FDiTech) published a new guide to help financial technology, or fintech, companies and others partner with banks.

    February 24, 2020 WebPage Regulatory News
    News

    APRA to Transition to Annual Stress Testing of Large Banks in 2020

    APRA published key findings of the stress testing assessment conducted on authorized deposit-taking institutions.

    February 21, 2020 WebPage Regulatory News
    News

    IAIS Statement on Monitoring Period of Insurance Capital Standard

    IAIS published a statement from its Secretary General Jonathan Dixon on the Insurance Capital Standard (ICS) monitoring period.

    February 21, 2020 WebPage Regulatory News
    News

    EC Consults on Review of Non-Financial Reporting Directive

    EC is launched a consultation on the review of the Non-Financial Reporting Directive or NFRD (Directive 2014/95/EU, as part of its strategy to strengthen sustainable investment in Europe.

    February 20, 2020 WebPage Regulatory News
    News

    EIOPA Consults on Standards for Supervisory Reporting Under PEPP Rule

    EIOPA is consulting on the implementing technical standards for supervisory reporting and cooperation, as mandated by the Pan-European Personal Pension Product (PEPP) Regulation (Regulation 2019/1238).

    February 20, 2020 WebPage Regulatory News
    News

    EIOPA Publishes Statement on Adverse Interest Rate Environment

    EIOPA published a supervisory statement on the impact of the ultra-low or negative interest rate environment on the insurance sector in EU.

    February 20, 2020 WebPage Regulatory News
    News

    ECB Report on Transfer of Liquidity from EONIA Products to €STR

    ECB published a report on the transfer of liquidity from the cash and derivatives products of the Euro Overnight Index Average (EONIA) to the Euro Short-Term Rate (€STR).

    February 19, 2020 WebPage Regulatory News
    News

    ESRB Publishes Report on Systemic Cyberattacks

    ESRB published a report that explores systemic implications of cyber incidents, such as cyberattacks.

    February 19, 2020 WebPage Regulatory News
    News

    FSB Chair Sets Out Key Deliverables for G20 Presidency of Saudi Arabia

    FSB published a letter from the Chair Randal K. Quarles to the G20 finance ministers and Central Bank governors ahead of the meetings in Riyadh on February 22-23.

    February 19, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4720