The Office of the Comptroller of the Currency (OCC) published its Semiannual Risk Perspective for Spring 2025, setting out key risks and supervisory themes for the federal banking system. While the OCC characterises the system as remaining sound, it points to heightened economic uncertainty amid geopolitical risk, sustained higher interest rates, weaker movement in some macroeconomic indicators, and shifts in consumer sentiment, alongside ongoing adoption of new technologies and fintech-enabled delivery models. The report identifies credit, market, operational, and compliance risks as the main risk themes. Commercial credit risk is increasing, with continued pockets of commercial real estate risk by property type, geography, and product, and elevated refinance risk for loans underwritten during lower-rate periods; retail credit risk is described as stable but with decelerating wage growth and adverse sentiment shifts. On market risk, net interest margins improved in the latter half of 2024 as effective federal funds rate (EFFR) cuts reduced funding costs, but the OCC emphasises the need for robust interest rate risk scenario analysis and sensitivity testing amid uncertainty about inflation and future EFFR movement; asset-based liquidity was stable in 2024, unrealised investment portfolio losses remain a focus, and deposit competition warrants monitoring. Operational risk is assessed as elevated, driven by the need to modernise systems and digitise amid fraud targeting checks, wire transfers, peer-to-peer platforms, and insiders, as well as evolving cyber threats and the continued importance of operational resilience and third-party risk management; compliance risk is also elevated, including Bank Secrecy Act/anti-money laundering and consumer compliance risks linked to fraud, account access concerns, and evolving business models. The assessment covers national banks, federal savings associations, and federal branches and agencies, using data as of 31 December 2024 unless otherwise indicated, and is organised around trends in key risks, the operating environment, and bank performance.
Office of the Comptroller of the Currency 2025-06-30
Office of the Comptroller of the Currency Semiannual Risk Perspective flags rising commercial credit risk and elevated operational and compliance risks
The Office of the Comptroller of the Currency (OCC) released its Semiannual Risk Perspective for Spring 2025, highlighting key risks and supervisory themes for the federal banking system. The OCC notes heightened economic uncertainty due to geopolitical risks, sustained higher interest rates, and shifts in consumer sentiment, with credit, market, operational, and compliance risks as primary concerns. The report underscores the need for robust interest rate risk analysis and highlights elevated operational and compliance risks amid evolving cyber threats and fraud.