Today, the Office of the Comptroller of the Currency (OCC) reported strategic, credit, operational, and compliance risks remain top concerns in its Semiannual Risk Perspective for Fall 2016 (OCC Semiannual Risk Perspective for Fall 2016).
Highlights from the report include:
- Strategic risk remains high as banks consider business model changes and face challenges in growing revenue. Strategic planning remains important as banks adopt innovative products, services, and processes in response to the evolving demands for financial services and the entrance of new competitors, such as out-of-market banks and financial technology firms.
- Banks continue to ease underwriting practices to boost loan volume and to respond to competition from bank and nonbank lenders. These actions are evident in commercial, commercial real estate and auto lending. The level of risk is increasing due to increased risk layering, rising loan policy exceptions, increasing loan-to-value ratios, and weaker covenant protection.
- Operational risk remains a concern as banks face changing cybersecurity threats, increased reliance on third-party relationships, and address the need for sound governance over sales practices.
- Banks face challenges meeting the integrated mortgage disclosure requirements and amended Military Lending Act regulatory requirements, the latter of which compliance was required by October 3, 2016, and managing Bank Secrecy Act risks.
The report covers risks facing national banks and federal savings associations based on data through June 30, 2016. It presents data in four main areas: the operating environment, bank performance, trends in key risks, and regulatory actions. It focuses on issues that pose threats to the safety and soundness of those financial institutions regulated by the OCC and is intended as a resource to the industry, examiners, and the public.