OCC Releases Risk Report with Key Issues Facing Federal Banking System

The Office of the Comptroller of the Currency (OCC)recently released its Semiannual Risk Report (the Report) outlining the key issues facing the federal banking system in the first half of 2021, particularly in light of the COVID-19 pandemic, and predicting the trajectory of those issues in 2022.

The Report presents data in five sections: (1) operating environment, (2) bank performance, (3) special topics in emerging risks, (4) trends in key risks, and (5) supervisory actions.

The Report, in Part IV, addresses trends in operational risk, credit risk, compliance risk, and strategic risk.  Operational risk remains elevated due to evolving cyberattacks and an increase in ransomware attacks, as well as frequent changes in technology and operations resulting from the COVID-19 pandemic.  Credit risk is moderate but the Report encourages banks to be attentive to the potential risks associated with the transition away from LIBOR and risks posed by forbearances expiring.  Compliance risk is heightened because of regulatory changes and the efforts banks need to make to serve customers in the final stages of COVID-19 programs and initiatives.