Featured Product

    OCC Publishes Semiannual Risk Perspective for Fall 2019

    December 09, 2019

    OCC published the Semiannual Risk Perspective for Fall 2019. The report covers risks facing national banks and federal savings associations based on data as of June 30, 2019. In this issue, operational, credit, and interest rate risks are among the key themes for the federal banking system. The report also highlights cyber-security and technology management as a special topic in emerging risks.

    The report focuses on issues that pose threats to the financial institutions regulated by OCC. It report covers information on operating environment of banks, bank performance, special topics in emerging risks, trends in key risks, and supervisory actions to address issues. According to the report, financial performance of banks is sound, partly because of a favorable credit environment and the longest economic expansion in U.S. history. Asset quality is strong and stable while leverage and risk-based capital ratios are at record levels, providing strong loss-absorption capacity. The following are the key highlights from the report:

    • Operational risk is elevated, as banks adapt to a changing and increasingly complex operating environment. Key drivers elevating operational risk include the need to adapt and evolve current technology systems for ongoing cyber-security threats.
    • Credit risk accumulated in many portfolios. Banks should prepare for a cyclical change while credit performance remains strong. Preparation includes maintaining robust credit control functions, particularly credit review, problem-loan identification, and workout, collections and collateral management.
    • Recent volatility in market rates led to increasing levels of interest rate risk. The complexity of asset-liability management is exacerbated by the recent yield curve inversions.
    • The London Interbank Offered Rate (LIBOR) will likely cease to be an active index by the end of 2021. Accordingly, OCC is increasing regulatory oversight of this area to evaluate bank awareness and preparedness.
    • Banks face strategic risks from non-depository financial institutions, use of innovative and evolving technology, and progressive data analysis capabilities.

    The report highlights that cyber-security continues to be a key concern as breaches and operational outages occur across all industries, including the financial sector. Banks generally have appropriate controls for operational stability and protection of bank and customer data. Banks strengthened risk management processes and controls to address concerns. As a result, cyber-security-related issues have decreased and have remained relatively stable over recent quarters, reflecting increasing maturity of banks’ cyber-security programs. However, cyber-security remains a significant risk area for banks, with opportunities for further improvement.

    In the special feature on cyber-security, OCC emphasizes that the cyber-security program of a bank should be part of an overall operational resilience framework. In addition to a well-documented and comprehensive incident response program, banks should consider partnering with the Financial Services Information Sharing and Analysis Center to share threat information and self-reporting incidents through the Federal Bureau of Investigation’s Internet Crime Complaint Center. Also, banks may be required to file Suspicious Activity Reports (SAR) with the Financial Crimes Enforcement Network for certain cyber events resulting in fraud. As institutions increasingly rely on third parties to help reduce costs and enhance technological capabilities, they should have processes to ensure that cyber-security controls are appropriate for the outsourced operations.

     

    Related Links

    Keywords: Americas, US, Banking, Operational Risk, Credit Risk, Interest Rate Risk, LIBOR, Semiannual Risk Perspective, Cyber Risk, OCC

    Related Articles
    News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News
    News

    HKMA Endorses Industry Guidance to Support LIBOR Transition

    The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).

    September 14, 2021 WebPage Regulatory News
    News

    FDIC Announces Winners of Tech Sprint to Reach Unbanked Consumers

    The tech lab of the Federal Deposit Insurance Corporation (FDIC) selected three winning teams in a tech sprint designed to explore new technologies and techniques to help banks meet the needs of unbanked consumers.

    September 13, 2021 WebPage Regulatory News
    News

    MAS Consults on Capital and Reporting Requirements for Market Risk

    The Monetary Authority of Singapore (MAS) launched a consultation on the standards for market risk capital and the associated reporting requirements for banks incorporated in Singapore.

    September 13, 2021 WebPage Regulatory News
    News

    PRA Letter Sets Out Findings on Reliability of Regulatory Reporting

    PRA published a "Dear CEO" letter that sets out findings of a review on the reliability of regulatory reporting and reiterates the supervisory expectations on regulatory reporting.

    September 10, 2021 WebPage Regulatory News
    News

    APRA Connect to Go Live; APRA to Reduce Reliance on CLF

    The Australian Prudential Regulation Authority (APRA) confirmed that its new data collection solution APRA Connect will go live on September 13, 2021.

    September 10, 2021 WebPage Regulatory News
    News

    FED Paper Explores Fintech Partnership Dynamics in Community Banks

    The Federal Reserve System (FED) published a paper describing the landscape of partnerships between community banks and fintech companies.

    September 09, 2021 WebPage Regulatory News
    News

    FDIC Selects Four Vendors for Next Phase of Rapid Prototyping Pilot

    The Federal Deposit Insurance Corporation (FDIC) has chosen four companies—Novantas Inc, Palantir Technologies Inc, PeerIQ, and S&P Global Market Intelligence LLC—to propose a pilot consisting of testing new reporting and analytical tools with a small group of FDIC-supervised institutions on a voluntary basis.

    September 09, 2021 WebPage Regulatory News
    News

    PRA Consults on Requirements to Identify Material Risk-Takers

    The Prudential Regulatory Authority (PRA), via the consultation paper CP18/21, proposed changes to the applicable requirements on the identification of material risk-takers for the purposes of the remuneration regime.

    September 08, 2021 WebPage Regulatory News
    News

    ESA Report Points to Elevated Credit and Cyber Risks in Wake of Crisis

    The Joint Committee of European Supervisory Authorities (ESAs) published its second 2021 joint risk assessment report for the financial sector.

    September 08, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7465