United States: OCC Reports on Federal Banking System Risks
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In its semi-annual risk outlook, the OCC highlighted operational, credit compliance and strategic risks impacting the federal banking system.
The OCC outlined the risks affecting national banks and federal savings associations based on data collected as of June 30, 2021.
The OCC concluded that:
- banks are showing resilience in the current environment with good credit quality and strong earnings; weak loan demand and low net interest margins continue to weigh on performance;
- the response to the delta variant should contribute to slowing the growth of the gross domestic product in the second half of the year; the deceleration caused by the spread of the variant is not expected to be significant due to increased business activity;
- operational risks are heightened as banks deal with changing operating environments and cyber risks;
- credit risks are moderate due to extensive government programs and adequate risk management;
- compliance risks are elevated due to regulatory changes and new policy initiatives; and
- Banks’ strategic actions to reduce the effects of low yields and NIM cuts can increase banking system risks.
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