OCC Highlights Risks To Federal Banking System

In its Semiannual Risk Perspective for Spring 2020, the OCC highlighted elevated compliance, operational and credit risks faced by the federal banking industry.

The OCC asserted that a "rapid decline in economic conditions [due to the COVID-19 pandemic] will broadly affect bank earnings, credit quality, operations, and capital," but that "market risk volatility [has] stabilized since the beginning of the pandemic as the creation of numerous Federal Reserve funding facilities improved market liquidity."

The OCC identified the following risks:

• "[b]ank profitability will be challenged as interest rates are at historic lows, past due loans and provisions for loan losses are increasing, and operational expenses are rising;