The Office of the Comptroller of the Currency ("OCC") detailed key risks facing the federal banking system in its Semiannual Risk Perspective for Fall 2017 (the "Report").
In the Report, the OCC asserted that certain operational, credit and compliance risks are significant concerns. The OCC highlighted the following:
- Aggressive competition, tighter spreads, and slowing loan growth are leading to easing of underwriting practices and increasing concentration of certain loan portfolios. If the economy weakens or markets tighten, this could lead to heightened credit risk.
- Emerging technologies, increasing sophistication of products and services, and increasing sophistication of cyberthreats result in the continued elevation of operational risk.
- Compliance risk remains high as banks manage money-laundering and consumer compliance risks. The increasing complexity of consumer compliance regulations creates challenges.
The OCC also identified the concentration of critical operations with third-party service providers as a potential issue. Widespread reliance on a small number of third parties to provide critical operations could create concentrated points of failure and, as a result, increase systemic risk to the financial system.
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