OCC Identifies Risks Facing National Banks, Federal Savings Associations

OCC Semiannual Risk Report

On July 5, the OCC’s National Risk Committee issued its Semiannual Risk Perspective, which identifies issues that pose threats to the safety and soundness of banks. According to the report, the three major risks facing national banks and federal savings associations are (i) the lingering effects of a weak housing market, (ii) revenue challenges related to slow economic growth and market volatility, and (iii) the potential that banks may take excessive risks in an effort to improve profitability. Within each of the three major risk areas, the report identifies “key risk themes.” For example, with regard to the aftereffects of the housing market bust, the report observes as themes: (i) flaws in foreclosure processing that are exacting large remediation costs, record penalties, and reputational damage for mortgage servicers, (ii) continued above average rates of delinquency and charge-off for housing-related loans, and (iii) persistently high commercial real estate vacancy rates and high levels of problem assets. This is the first semiannual risk report published by the OCC; it is based on data as of December 31, 2011.