Economic uncertainty has increased as consumer sentiment, geopolitical risk, sustained higher interest rates, and downward movement in some macroeconomic indicators have all had their impact on threats to the banking system, the national bank regulator said Monday.
In its Semiannual Risk Perspective for Spring 2025, the Office of the Comptroller of the Currency (OCC) outlined five key risks to the federally regulated banks and thrifts. Those are risks in commercial credit, operations, compliance, retail credit and markets.
The agency termed the first three risks as increasing or elevated. In commercial credit, the OCC report said geopolitical risk, sustained higher interest rates, growing caution among businesses and their customers, and other macroeconomic uncertainty are to blame for the rising threat.
“Pockets of risk remain for some commercial real estate property types and vary by geographic market and product type. Refinance risk remains high for loans underwritten during a period of lower interest rates.
Regarding operational risk, the OCC report asserted that banks’ failure to upgrade their systems and digitize “may result in loss of market share to competitors offering faster and cheaper payment alternatives.” The report also warned that criminals are exploiting traditional payment systems and fraud schemes are rampant. It indicated checks, wire transfers, peer-to-peer payment platforms, and insiders are all subject to fraud.
As for increased compliance risk, the report pointed to Bank Secrecy Act/anti-money laundering (BSA/AML) and consumer compliance risks associated with elevated fraud levels, account access concerns, and evolving business models.
OCC Report Highlights Key Risks in Federal Banking System
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