The importance of innovation in banking is given “special topic” attention in the national banking regulator’s semiannual risk perspective report, which also provides updates on the industry’s credit, market, cybersecurity and fraud risks.
The report, released Tuesday by the Office of the Comptroller of the Currency (OCC), says innovation brings risks, but that a lack of investment in new technologies, products, and services “may present material risks to long-term bank performance.” The OCC, it says, “seeks to foster a regulatory environment that enables banks to advance their businesses and client interests while managing financial risks and operating in a safe and sound manner.” The report notes banks of all sizes exploring uses of artificial intelligence (AI), with some banks deploying sophisticated models to improve credit underwriting, detect fraud in real time, and personalize customer experience.
Among other highlights:
- Credit risk: In recent regulatory underwriting surveys, banks reported tighter underwriting standards for commercial and industrial (C&I) loans. Banks also reported tighter underwriting standards and weaker demand for CRE loans and residential mortgage loans over the course of 2025. Among banks that reported tighter lending standards for C&I loans, a more uncertain economic outlook was cited as the most common reason. Those noting weaker demand for such loans attributed it to lower customer investment in plants and equipment as well as decreased financing needs for inventories.
- Market risk: In aggregate, banks with assets less than $1 billion realized higher NIM [net interest margin] over the first half of 2025 due to higher loan pricing relative to prior years, but those with assets greater than $1 billion noted a slight decrease in NIM on average, as loan yield declines offset reductions in deposit costs.
- Cybersecurity: The OCC has observed an increase in threats posed by foreign state-sponsored actors and sophisticated cybercriminal groups targeting the financial sector. It noted public advisories from the State Department, Treasury, and Federal Bureau of Investigation (FBI) warning the public and private sectors of the threat posed to U.S. businesses by information technology (IT) workers from the Democratic People’s Republic of Korea. It also said a recent firewall access incident highlights the ongoing importance of banks continuing to manage risks related to aging infrastructure and end of life (EOL) of IT assets.
- Fraud risk: The report says banks continue to face challenges from elevated levels and sophistication of fraud, including scams. It notes that fraud is a key driver of operational losses, which may warrant a dynamic and adaptive risk management environment. Meanwhile, the OCC (along with other banking agencies) is currently in the process of reviewing comments on a June request for information (RFI) on potential actions to reduce payments fraud.
OCC’s Semiannual Risk Perspective Highlights Key Risks in Federal Banking System