OCC Reports on Risks to Federal Banking System

In its semiannual risk perspective, the OCC highlighted the operational, credit, compliance and interest rate risks facing the federal banking system.

The OCC concluded that:

• banks are remaining surprisingly resilient in the current environment with adequate capital and ample liquidity in case of a recession;

• investment portfolio values and banks' access to funding are expected to remain under pressure as the Federal Reserve continues to raise short-term interest rates;

• banks continue to face elevated operational and cybersecurity risks;

• bank indicators of loan quality stress increased in Q3, with emerging weaknesses in both commercial and retail loans; and

• compliance risks remain elevated as banks continue to grapple with new technologies and significant regulatory changes.