OCC Report Identifies Key Risks Facing Federal Banking System

WASHINGTON—The Office of the Comptroller of the Currency (OCC) today reported the key issues facing the federal banking system in its Semiannual Risk Perspective for Spring 2023.

The OCC reported that the overall strength of the federal banking system is sound. The OCC has closely monitored the condition of the institutions it supervises throughout the market stress this spring and has engaged directly with its banks to ensure they are appropriately managing their risks and restoring confidence in the banking system.

The banking system faced increased volatility due to a liquidity crisis in the first quarter of 2023. Banks are focused on stabilizing liquidity and maintaining confidence in the banking system. Banks should remain diligent and maintain effective risk management practices over critical functions to continue to withstand current and future economic and financial challenges.

The OCC highlighted liquidity, operational, credit, and compliance risks, among the key risk themes in the report. Highlights from the report include:

  • Liquidity levels have been strengthened in response to the failures of several banks and investment portfolio depreciation. Rising long-term rates caused significant depreciation in investment portfolios, focusing attention on banks’ liquidity risk profiles.
  • Credit risk remains moderate in aggregate, but signs of stress are increasing, for instance in certain segments of commercial real estate. Overall, credit markets and loan portfolios remain resilient, and problem loan levels remain manageable. The persistent drag from high inflation and rising interest rates, however, is causing credit conditions to deteriorate.
  • Operational risk is elevated. Cyber threats persist. Digitalization of banking products and services is expanding, especially as banks increase use of third parties. This expansion presents both opportunities and risks.
  • Compliance risk is elevated. Banks continue to operate in a dynamic environment in which compliance management systems are challenged to keep pace with changing products, services, and delivery channel offerings developed in response to customer needs and preferences.

The report also highlights the OCC’s initiative on managing climate-related financial risks to the federal banking system and discusses the challenges and costs associated with the continued use of aging technologies and systems reaching their end of life and the importance of banks investing and aligning technology with their business goals.

The report covers risks facing national banks, federal savings associations, and federal branches and agencies based on data as of December 31, 2022, unless otherwise indicated. The report presents information in five main areas: the operating environment, bank performance, special topics in emerging risks, trends in key risks, and supervisory actions. The report focuses on issues that pose threats to those financial institutions regulated by the OCC and is intended as a resource to the industry, examiners, and the public.

Related Link

IR Press

Share
Published by
IR Press

Recent Posts

OCC Announces Enforcement Actions for November 2024

WASHINGTON—The Office of the Comptroller of the Currency (OCC) today released enforcement actions taken against…

23 hours ago

Remarks by Secretary of the Treasury Janet L. Yellen on the 30th Anniversary of the Community Development Financial Institution Fund

As Prepared for Delivery Good afternoon. It’s an honor to welcome President Clinton to Treasury today…

2 days ago

Treasury Sanctions Gazprombank and Takes Additional Steps to Curtail Russia’s Use of the International Financial System

Treasury imposes sanctions on dozens of Russian banks, securities registrars, and finance officials; OFAC issues…

2 days ago

Acting Comptroller Testifies on State of the Federal Banking System

WASHINGTON—Acting Comptroller Michael J. Hsu today testified on the state of the federal banking system…

2 days ago

Remarks by Assistant Secretary for International Finance Brent Neiman on the U.S. Cross-Border Payments Agenda

As Prepared for Delivery Thank you very much for the opportunity to be here today, and…

4 days ago