On June 18, 2024, the OCC released their Spring 2024 edition of the publication Semiannual Risk Perspective. The publication 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.
The Spring 2024 Semiannual Risk Perspective report presents data in four main areas: the special topic, operating environment, bank performance, and trends in key risks. Highlights from this edition include:
The condition of the federal banking system remains sound. It is important for banks to continue identifying material risks and their interconnected impacts. Continuous risk management improvement remains appropriate as this allows banks to guard against complacency.
The economy outperformed forecasts in 2023. Consumers, supported by a robust labor market and record wealth, continued to support economic activity.
However, the maturing economic cycle may cause consumer headwinds. Job openings and quit rates have been declining and the cooling job market may negatively affect wage growth. A slowing labor market, high interest rates, and sticky inflation could cause consumer financial stress and reduce consumption.
Despite the Blue Chip Consensus projecting a “soft landing” for the U.S. economy and core inflation to slow, the persistence of an inverted yield curve and possibility of prolonged elevated rates highlight the continued importance of prudent interest rate risk management.
While higher interest rates provided a lift to loan yields and margins earlier in the year, funding pressures also took hold in the higher rate environment. The outlook for the remainder of 2024 relies on banks’ ability to manage funding costs, weaker loan growth, and higher credit costs.
The Spring 2024 OCC Semiannual Risk Perspective can be found here.