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Spring 2013

OCC Report Focuses on Risks Facing National Banks and Federal Savings Associations

This publication is part of:

Collection: Semiannual Risk Perspective


Key risks facing national banks and federal savings associations involve the potential for banks to take excessive risks to improve profitability, revenue challenges from a slow economy, and a surge in sophisticated cyber threats.

The Office of the Comptroller of the Currency's Semiannual Risk Perspective for Spring 2013 details risks facing the banking industry:

  • Strategic risk remains high and continues to increase for many banks as they re-evaluate their strategy and business models to generate returns amid slow economic growth, low rates, and regulatory requirements. OCC examiners will focus on banks' strategic planning processes and new product planning to ensure adequate consideration of safe and sound business practices, and potential compliance, reputation, and operational risks.
  • Cyber threats continue to grow in sophistication and require heightened awareness and appropriate resources to identify and mitigate the associated risks.
  • Demand for domestic loans, particularly commercial loans, has improved. Increased competition for limited commercial and industrial lending opportunities, especially leveraged lending, is weakening underwriting standards.
  • The low interest rate environment increases vulnerability for banks that reach for yield, as they could experience significant earnings pressure, potentially to the point of capital erosion, when interest rates increase.
  • Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) risks are on the rise as money laundering methods evolve, electronic bank fraud increases in volume and sophistication, and banks fail to evolve or incorporate appropriate controls into new products and services.

The report presents data in four main areas: the operating environment; condition and performance of the banking system; funding, liquidity, and interest rate risk; and regulatory actions. The report focuses on issues that pose threats to the safety and soundness of those financial institutions regulated by the OCC and is intended as a resource to the industry, examiners, and the general public. The report reflects data as of December 31, 2012.