Strategic, underwriting, cybersecurity, compliance and interest rate risks are the top supervisory concerns in the Office of the Comptroller of the Currency’s recently released Semiannual Risk Perspective for Fall 2015. The report noted that the risks associated with underwriting and cybersecurity are increasing, while strategic, compliance and interest rate risks remain stable.
The Semiannual Risk Perspective addresses key issues facing banks, focusing on those that pose threats to the safety and soundness of banks and their compliance with applicable laws and regulations. It is intended as a resource to the industry, examiners and the public, according to an OCC news release.
Highlights of the report include:
• Many national banks and federal savings associations continue to face strategic challenges to growing revenues to meet target rates of return in a slow-growth, low interest rate environment.
• Banks and thrifts are easing credit underwriting standards and practices, including structure, terms, pricing, collateral, guarantors and loan controls in response to competitive pressures and growth objectives. This easing is particularly evident in high-growth loan segments, such as indirect auto, commercial and industrial and multifamily.
• The ongoing low-interest rate environment poses additional concerns as banks reach for yield by loosening underwriting and extending asset duration trends. The low interest rate environment continues to pressure net interest margins as asset yields decline and the cost of funds has stabilized at historic lows.
• Cyber threats, reliance on service providers and resiliency planning remain industry concerns, particularly in light of increasing global threats.
• Regulatory amendments and reliance on third parties continue to create challenges for bank consumer compliance functions. Bank Secrecy Act risk also continues to increase as criminal behaviors evolve and as criminals leverage new technology.
The report covers risks facing national banks and federal savings associations and reflects bank financial data gathered as of June 30, 2015. It presents data in four main areas: the operating environment, bank condition, key risk issues and regulatory actions.
The full report is available at http://www.occ.gov/publications/publications-by-type/other-publications-reports/semiannual-risk-perspective/semiannual-risk-perspective-fall-2015.pdf. Individuals who would like to give feedback on the report can do so by email at NRCReport@occ.treas.gov.