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This podcast provides you the ability to listen to new regulatory guidance issued by the National Credit Union Administration, and occasionally the F D I C, the O C C, the F F I E C, or the C F P B. We will focus on new and material agency guidance, and historically important and still active guidance from past years that NCUA cites in examinations or conversations. This podcast is educational only and is not legal advice. We are sponsored by Credit Union Exam Solutions Incorporated. We also have another podcast called With Flying Colors where we provide tips for achieving success with the N C U A examination process and discuss hot topics that impact your credit union.
Samantha: Hello, this is Samantha Shares.
This episode covers the Office
of the Comptroller of the
Currency (O C C) Semiannual Risk
Perspective for Spring 2024.
The following is an audio version of
that advisory and the press release.
This podcast is educational
and is not legal advice.
We are sponsored by Credit Union
Exam Solutions Incorporated, whose
team has over two hundred and
Forty years of National Credit
Union Administration experience.
We assist our clients with N C
U A so they save time and money.
If you are worried about a recent,
upcoming or in process N C U A
examination, reach out to learn how they
can assist at Mark Treichel DOT COM.
Also check out our other podcast called
With Flying Colors where we provide tips
on how to achieve success with N C U A.
And now the Risk Perspective Summary.
We may publish additional portions
of this document later this summer.
The Office of the Comptroller of
the Currency (O C C) today reported
the key issues facing the federal
banking system in its Semiannual
Risk Perspective for Spring 20 24.
The O.C.C.
reported that the overall condition of
the federal banking system remains sound.
However, the maturing economic
cycle may cause consumer headwinds.
It is important for banks to
continue identifying material risks
and their interconnected impacts.
Continuous risk management improvement
remains appropriate as this allows
banks to guard against complacency.
The O.C.C.
highlighted credit, market,
operational, and compliance risks,
as the key risk themes in the report.
Highlights from the report include:
ï§ Credit risk is increasing.
Commercial real estate sectors,
primarily the office sector and
some multifamily property types, are
experiencing stress due to a higher
rate environment and structural changes.
Office and multifamily loans,
particularly those with interest-only
terms, set to refinance over the next
three years pose additional risk.
Sticky inflation and elevated interest
rates may increase consumer financial
stress in some households and weigh
on overall consumption growth.
ï§ From a market risk perspective, net
interest margins (NIMs) are under pressure
due to strong deposit competition.
Trends observed, however, indicate
that pressure on funding costs
and NIMs may be nearing a peak.
The future direction, timing,
and extent of rate movements
and uncharted depositor behavior
present risk management challenges.
Wholesale funding usage continued to grow
albeit at a slower pace going into 20 24.
Investment portfolio depreciation improved
but unrealized losses remain elevated as
banks continue to increase asset liquidity
and interest rates remain elevated.
ï§ Operational risk is elevated.
The financial industry is responding
to an evolving and increasingly
complex operating environment.
Cyber threats continue as malicious
actors target the financial services
industry and their key service providers
with ransomware and other attacks.
Increasing digitalization, new
and innovative product and service
adoption, and third-party use increase
bank operating environment complexity
creating both opportunities and risks.
Continued check and wire transfer
fraud and increased payment fraud
incidents both underscore the
importance of fraud risk management.
ï§ Banks are operating in a dynamic
banking environment because of changing
customer needs and preferences related to
products, services, and delivery channels.
Risks are compounded if products
and services, including changes,
are not delivered or implemented
in a fair and equitable manner.
It remains important for banks to maintain
a compliance risk management framework
that is commensurate with their risk
profiles and capable of growing and
evolving as their risk profiles change.
Fraud continues to be
significant risk for banks.
Effective processes to prevent,
identify and file suspicious activity
reports on fraudulent activity in
a timely manner remain important to
protect both banks and consumers.
As banks work to process checks
and other payments in a safe, fair,
and efficient manner, check and
wire fraud, and P2P transaction
scams have become more prevalent.
The O.C.C.
continues to assess banksâ Community
Reinvestment Act performance under
the 1995 2021 regulatory framework.
The report highlights the necessity
of firmwide resilience efforts
as risks may be interconnected
and events could simultaneously
affect multiple risk categories.
It is crucial that banks establish
an appropriate risk culture
that identifies potential risk,
particularly before times of stress.
Each stress event may vary
(e.g., operational, liquidity,
credit, compliance, and other)
and resiliency implications need
to be proactively considered.
Prudent planning from a firmwide
perspective can enhance a bankâs
ability to maintain operations,
remain financially sound, and
service customers in times of stress.
The report covers risks facing national
banks, federal savings associations,
and federal branches and agencies
based on data as of December 31,
2023, unless otherwise indicated.
The report presents information
in four main areas: the special
topic, operating environment, bank
performance, and trends in key risks.
The report focuses on issues that
pose threats to those financial
institutions regulated by the O.C.C.
and is intended as a resource to the
industry, examiners, and the public.
This concludes the O C C
Risk perspective summary.
If your Credit union could use assistance
with your exam, reach out to Mark Treichel
on LinkedIn, or at mark Treichel dot com.
This is Samantha Shares and
we Thank you for listening.