OCC introduces new Risk Perspective Report
The lingering effects of the weak housing market will continue to challenge banks in late 2012, and revenue growth will be hampered by conditions in a post-recession economy. These are some of the risks discussed in a new report, Semiannual Risk Perspective - Spring 2012 issued by the Office of the Comptroller of the Currency (OCC). Released in July of this year, the report expounds on the primary risks facing national banks and federal savings association (collectively, banks) and reflects data as of Dec. 31, 2011.
This issue marks the first time the report has been released. Intended as a resource for both examiners and banks, the report will be released by the OCC twice a year. Each report will deal with risks faced by banks and will analyze four key topics: (1) the operating environment, (2) the condition and performance of the national banking system, (3) funding, liquidity and interest rate risk and (4) regulatory actions. The report is issued by the OCC's National Risk Committee, which monitors emerging threats to the banking system's safety and soundness.
The new report discusses the continued repercussions of the recessions of 2007 and 2009 upon the U.S. banking system, which has faced significant shifts in the operating and regulatory environments. The shifts have forced banks to make major changes in their risk and profitability profiles. Most notably, levels of capital and allowances for loan losses are more robust and of higher quality than prior to the recession. The higher levels are seen across the industry, but are especially evident at the larger banks.
Attempts to get higher yields may pose a risk
In addition to the risks engendered by a slow-growth economy and the aftereffects of the recession, the report discusses a third major threat – the possibility that banks, in an effort to improve profitability in a lackluster market, may take on excessive risks. Some of these risks are reviewed below:
Community and mid-sized banks
The report offers risk perspectives for different business lines. For community and mid-sized banks, it highlights the following issues:
Although bankers are familiar with much of what is discussed in the report, it may be an opportune time to evaluate some of your bank's policies, practices and plans, especially prior to your next safety and soundness examination. For more information on this issue, please contact Tim Tiefenthaler, partner, at 702.759.4050.
- Banking/Financial Institutions
- Consumer Products
- Financial Services
- Food and Beverage
- Government Contracting
- Government Entities
- Health Care
- Life Sciences
- Manufacturing and Distribution
- Private Clubs
- Private Equity
- Real Estate
- Specialized Industries