Treliant Takeaway…The OCC’s View of Key Risks

OCC’s Semiannual Risk Perspective Spring 2024

• Source: occ.gov

Takeaway

The OCC takes a system-wide view of what they are seeing at institutions and provides important context of their concerns.  Banks need to ensure they are taking appropriate measures to manage these risks at their institutions.

Treliant can assist your institution with reviewing the bank’s programs for each of these risks, implement enhancements, and develop contingency plans should these risks manifest themselves at your bank.

Highlights

In its Spring 2024 semiannual risk perspective, the OCC highlighted the key risks it sees to the federal banking system. This report provides important context as to what the OCC is seeing at the banks it supervises and more broadly in the financial services sector. It can be used by bankers to understand supervisory priorities and more importantly what should be top of mind for senior management and the board for the remainder of the year.

The OCC highlighted the following key risks:

• Credit risk, particularly in the commercial real estate sector, has increased and banks should proactively manage these exposures with their customers to avoid credit issues further down the line.
• NIM pressure has continued due to strong deposit competition and the unclear direction and timing of future rate movements provide an uncertain path on how NIM will be impacted in the near future. Banks should ensure they are conducting several scenarios to better understand the various paths they could be facing.
• Operational risk takes center stage with a focus on cyber risk given the increased digitization of the financial services sector. Banks should assess their vulnerabilities and ensure they have comprehensive plans to address these risks should they be impacted.

Given the level of change in the banking sector, the OCC highlights the potential compliance risks if banks make these changes too quickly and missteps with the implementations, particularly noting fair & responsible banking and financial crimes risk as being concerns. Banks should include the compliance considerations as they are implementing changes and do so thoughtfully with appropriate plans.

We are regularly talking to our clients about these issues and can provide meaningful context and real-world assistance as to how to mitigate these risks at your institution. Contact us today to discuss our perspective.