OCC Reports on Major Risks Faced by National Banks and Federal Savings Associations

The Office of the Comptroller of the Currency ("OCC") issued a report titled "Semiannual Risk Perspective for Fall 2015." According to the report, risks associated with underwriting and cybersecurity are increasing, while strategic, compliance and interest rate risks remain stable.

The report addresses key issues faced by banks and presents the following findings:

  • The Operating Environment. Competitive pressures, the search for revenue growth and an ongoing low-interest-rate environment continue to challenge bank risk management and influence appetites for risk. In this environment, banks have lowered their underwriting standards and disregarded credit risks in order to reach for yield.
  • Bank Conditions. Strategic risk remains high for many banks as management searches for sustainable ways to generate target rates of return and struggles to implement strategic plans. These risks affect banks differently depending on their size. Smaller banks are exposed to greater risk in their search for revenue. For larger banks, exposure lies in balance sheet adjustments and corporate structurings that are intended to generate acceptable revenue.
  • Key Risk Issues. Operational risks increase as banks adapt business models, transform technology and operating processes, and respond to the growing number of cyber threats.
  • Regulatory Actions. Compliance risk remains high as banks manage Bank Secrecy Act and anti-money laundering risks and implement changes to policies and procedures to comply with new mortgage lending requirements. Banks also face risks when involving third parties in consumer-credit-related products. In recent years, a number of banks dealt with OCC enforcement actions after failing to exercise adequate risk management when offering various add-on products to customers.

Comptroller of the Currency Thomas Curry said this about the report: "We saw in the aftermath of the financial crisis that there is a price to be paid for ignoring compliance. The good news for banks is that there's evidence of progress in this report." Comptroller Curry also pointed out that the report is intended not only to provide focus to the OCC, but also to assist banks in understanding the examiner's priorities.

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