OCC Outlines Top Risks Facing the Banking Industry

On Thursday, January 5, 2017, the OCC issued its Fall Semiannual Risk Perspective, covering January to June of 2016. As in past reports, strategic, credit, operational and compliance risk were top concerns. However, leveraged lending – a top concern in the past – has diminished in focus, while governance over sales practices rose to the level of a key risk area. Key findings 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 fintech firms.
  • Banks continue to loosen underwriting practices to increase loan volume and to respond to competition from bank and nonbank lenders. These actions are evident in commercial, commercial real estate and auto lending.
  • 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 TILA-RESPA Integrated Disclosure requirements and amended Military Lending Act regulatory requirements, and managing Bank Secrecy Act risks.