‘Credit risk’ gets top billing in ‘risk perspective’ issued by national bank regulator

Credit risk is the top “emerging risk” listed by the regulator of national banks in its semi-annual report issued Monday on threats to the banking industry.

According to its Semiannual Risk Perspective for Fall 2020 issued by the Office of the Comptroller of the Currency (OCC), credit risk “is increasing as the economic downturn impacts customer ability to service debts.”

The semiannual report covers risks facing national banks and federal savings associations based on data as of June 30. The OCC said the report presents information in four main areas: the operating environment, bank performance, special topics in emerging risk, and trends in key risks.

It also 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.

Other top risks identified in the report include:

  • Strategic risk due to the historically low rate environment, potential credit stress and their effect on bank profitability.
  • Elevated operational risk as financial institutions respond to altered work environments and an evolving and complex operating environment. Cybersecurity threats contribute as a key driver of the heightened operational risk environment, the OCC said.
  • Rising compliance risk due to a combination of altered work environments, and the requirement to quickly operationalize federal, state, and proprietary programs designed to support businesses and consumers.

The agency said its report also highlights emerging trends in payment products and services as a special topic in emerging risks.

OCC Semiannual Risk Perspective for Fall 2020 (PDF)