The Office of the Comptroller of the Currency (OCC) released earlier this week its Semmiannual Risk Perspective for Spring 2019. The 30-page report, authored by the OCC’s National Risk Committee, reflects the agency’s view of current risks facing OCC-regulated banks. One of the functions of the National Risk Committee is to guide bank examiners on issues warranting supervisory attention, and thus the risks identified by the Committee can foreshadow areas that will receive particular attention from bank examination teams over the next several months.

The Semiannual Risk Perspective for Spring 2019 reflects a continuing focus from the OCC on compliance risk, with the report describing Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance risk, in particular, as “high.” The report states that “[b]anks are challenged to effectively manage money-laundering risks in a complex, dynamic global operating and regulatory environment,” and it emphasizes that “BSA/AML compliance risk management systems should be commensurate with the risk associated with a bank’s products, services, customers, and geographic footprint.”

The Semiannual Risk Perspective also describes operational risk as elevated, flagging cybersecurity threats as a key driver of such risk. The report additionally identifies an anticipated increase in merger and acquisition activity by banks as a driver of operational risk, particularly where acquisitions and post-acquisition integrations are “not well-planned and executed.”

The Semiannual Risk Perspective addresses fintech and regtech issues under several different categories of risk, noting that rapid growth in both sectors “touch[es] each of [the] risk themes” discussed in the report. Fintech is identified as a source of strategic risk, with the report emphasizing that banks should consider, among other things, the extent to which deployment of fintech increases a bank’s dependence on vendors. The report’s observations in this regard reflect longstanding concerns from regulators, including that banks across the industry may become dependent on a single vendor, or a small group of vendors, who are market leaders with respect to a particular software application or technological service.

The report’s emphasis on the strategic risk resulting from technological change is noteworthy in light of the OCC’s encouragement of a national bank fintech charter and its recent promotion of innovation pilot programs. Notwithstanding the risks associated with new technologies, the OCC’s report acknowledges that banks cannot stay competitive without making use of them.

In addition to the above non-financial risks, the report addresses credit, liquidity, and other financial risks resulting from: “successive years of [economic] growth” and an accompanying “incremental easing in underwriting”; competitive pressures that may lead to an increase in the cost of deposits; and, relatedly, the potential that deposits have become less sticky, meaning that fluctuations in interest and deposit rates could give rise to liquidity risk.