On 11/9/2020, the OCC published their fall 2020 edition of the publication, Semiannual Risk Perspective. In their release, the OCC explains that Banks remain in strong financial condition but profitability is stressed due to low interest rates and increasing levels of provisions for problem loans. As would be expected, the OCC identified credit, strategic, operational, and compliance risks as key themes for financial institutions.
Highlights from the report, which is as of June 30, 2020, include:
Credit risk is increasing as the economic downturn impacts customer ability to service debts.
Strategic risk is an emerging issue due to the historically low rate environment, potential credit stress and their effect on bank profitability.
Operational risk is elevated as financial institutions respond to altered work environments and an evolving and complex operating environment. Cybersecurity threats contribute as a key driver of the heightened operational risk environment.
Compliance risk is elevated due to a combination of altered work environments, and the requirement to quickly operationalize federal, state, and proprietary programs designed to support businesses and consumers.
The report also highlights emerging trends in payment products and services as a special topic in emerging risks.
The full Semiannual Risk Perspective can be found here.
