OCC Finds Troublesome Easing of Lending Standards

December 22nd, 2014

Last week, the Office of the Comptroller of the Currency (OCC) published its Semiannual Risk Perspective for Fall 2014.  The regulator found growing credit risk among the national banks and federal savings associations it regulates during the first two quarters of 2014.  The report cites “declining revenues and profitability,” as a result of increasing competition for a limited pool of creditworthy borrowers.

In its assessment, the OCC evaluated an institution’s:  (1) operating environment; (2) condition; (3) key risk issues; (4) the range of practice in interest rate risk modeling; and, (5) regulatory actions.

The media has quickly called attention to the findings that lending standards have continued to loosen for the past three years, now reaching pre-2008 recession levels.  The OCC also highlighted the mounting risks associated with the United States (US) economy’s prolonged low interest rates and expanding risk appetites.  The report also found that “Bank Secrecy Act and Anti-Money Laundering risks remain prevalent as money-laundering methods evolve and electronic bank fraud grows in sophistication and volume.”


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