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Financial Services Law Insights and Observations

OCC Releases Spring 2017 Semiannual Risk Report

Agency Rule-Making & Guidance OCC Risk Management Consumer Finance Payments Consumer Lending Privacy/Cyber Risk & Data Security Anti-Money Laundering Military Lending Act Compliance Bank Regulatory Vendor Management

Agency Rule-Making & Guidance

On July 7, the Office of the Comptroller of the Currency (OCC) announced the release of its Semiannual Risk Perspective for Spring 2017 indicating key risk areas for national banks and federal savings associations. Acting Comptroller of the Currency Keith Noreika pointed out in his remarks that, “[w]hile these are risks that the system faces as a whole, we note that the risks differ from bank to bank based on size, region, and business model. Compliance, governance, and operational risk issues remain leading risk issues for large banks while strategic, credit, and compliance risks remain the leading issues for midsize and community banks.”

The report details the four top risk areas:

  • Elevated strategic risk—banks are expanding into new products and services as a result of fintech competition. According to the report, this competition is increasing potential risks. The OCC hopes to finish developing a special purpose banking charter for fintech companies soon.
  • Increased compliance risk—banks must comply with anti-money laundering rules and the Bank Secrecy Act in addition to addressing increased cybersecurity challenges and new consumer protection laws.
  • Upswing in credit risk—underwriting standards for commercial and retail loans have been relaxed as banks exhibit greater enthusiasm for risk and attempt to maintain loan market share as competition increases.
  • Rise in operational risk—banks face increasingly complex cyber threats while relying on third-party service providers, which may be targets for hackers.

The report used data for the 12 months ending December 31, 2016.

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