The Office of the Comptroller of the Currency (OCC), whose mission is to ensure that national banks and federal savings associations conduct business in a safe manner, provide fair access to services, treat customers fairly, and comply with applicable laws and regulations, released its Fall 2016 Semiannual Risk Perspective, which draws on data gathered from the beginning of 2016 through June 30, 2016.
The report highlights key issues the federal banking system is facing, focusing on those that pose the greatest threats to the overall health of banks and their ability to comply with industry regulations.
Digital transformation challenges in banking have been well understood and the strategies to address them simple and clear. However, it is becoming increasingly apparent that the industry is reaching a tipping point in the digital transformation journey.
The findings indicate that the four main risks financial services companies are facing revolve around strategic, credit, operational, and compliance risks.
- Strategic risk remains high for many banks, as management teams consider business model changes and search for sustainable ways to generate target rates of return in a persistent low interest rate environment.
- Competitive pressures and continued growing credit risk appetites have driven easing in underwriting standards and increased credit risk for some loan portfolios.
- Operational risk is high as banks adapt business models, transform technology and operating processes, and respond to increasing cybersecurity threats.
- Compliance risk remains high as banks continue to manage money laundering risks subject to resource constraints in an increasingly complex risk environment and implement changes to policies and procedures to comply with amended consumer protection requirements.
To learn more about the findings, you can read the report here.