On 12/10/19, the OCC released their Semiannual Risk Perpsective for Fall 2019. This twice-a-year report provides highlights of risk trends in the banking industry. Highlights from this edition include:
Operational risk is elevated as banks adapt to a changing and increasingly complex operating environment. Key drivers elevating operational risk include the need to adapt and evolve current technology systems for ongoing cybersecurity threats.
Credit risk has accumulated in many portfolios. Banks should prepare for a cyclical change while credit performance remains strong. Preparation includes maintaining robust credit control functions, particularly credit review, problem loan identification and workout, collections, and collateral management.
Recent volatility in market rates has led to increasing levels of interest rate risk. The complexity of asset/liability management is exacerbated by the recent yield curve inversions.
The London InterBank Offered Rate (Libor) will likely cease to be an active index by the end of 2021. Accordingly, the OCC is increasing regulatory oversight of this area to evaluate bank awareness and preparedness.
Banks face strategic risks from non-depository financial institutions, use of innovative and evolving technology, and progressive data analysis capabilities.
The full OCC publication can be found here.