The Office of the Comptroller of the Currency (OCC) reported credit, operational, compliance, and interest rate risks are key themes for the federal banking system in its Semiannual Risk Perspective for Spring 2018.

Highlights from the report include:

• Competition for quality loans is strong, as examiners note evidence of eased underwriting. The accommodating credit environment warrants a continued focus on underwriting practices to monitor and assess credit risk and lender complacency.
• Operational risk is elevated as banks adapt business models, transform technology and operating processes, and respond to evolving cyber threats.
• Compliance risk is elevated as banks manage money laundering risks and implement changes to policies and procedures to comply with amended Bank Secrecy Act and consumer protection requirements.
• The continued increase in market interest rates may eventually lead to higher funding costs for banks, as economic growth increases loan demand and competition for funding pressures banks to raise deposit yields.

The report covers risks facing national banks and federal savings associations based on data as of March 31, 2018. The report presents data in five main areas: the operating environment, bank performance, special topics in emerging risk, trends in key risks, and supervisory actions. It focuses on issues that pose threats to those financial institutions regulated by the OCC and is intended as a resource to the industry, examiners and the public.