OCC releases annual report

The OCC released its annual report, highlighting regulatory updates, enforcement activity, and important trends in 2015. The report noted that the banking system remained safe and sound in fiscal condition, showing improvement over last year. The OCC emphasized several regulatory focuses, including cybersecurity, high-risk lending, Bank Secrecy Act/Anti-Money Laundering requirements, and consumer protection. The report also highlighted the OCC’s efforts to support community banks.

In the report, the OCC identified the several areas of concerns for banks:

  • Cybersecurity.  The OCC and other FFIEC member agencies created a Cybersecurity and Critical Infrastructure Working Group to assess cybersecurity risks and propose guidelines. The FFIEC member agencies also created a new cybersecurity assessment tool, which uses a formula to assist banks in determining their inherent risk profile and level of cybersecurity preparedness. The OCC plans to use the assessment tool as part of a cybersecurity component of bank exams.
  • Credit risk.  With improvements in the economy, banks experienced a significant increase in loan activity. The OCC noted that with an increase in both the demand for credit and banks’ supply of capital, there was a trend toward easing loan underwriting standards. The OCC plans to monitor this trend to ensure safety and soundness of the federal banking system.
  • Compliance risk. The report highlighted several recent enforcement actions relating to BSA/AML compliance. The OCC noted that BSA/AML compliance continues to be an area of focus and reiterated banks’ obligation to objectively assess all customers on a case-by-case basis to ensure compliance. The OCC issued new guidance on BSA/AML compliance and is currently considering how to make compliance less reliant on subjective decision-making.
  • Consumer protection. The OCC urged banks to closely monitor their marketing partners and vendors to ensure compliance with applicable regulations. In 2015, the OCC took action to stop unfair billing and deceptive marketing practices, particularly in the areas of identity theft protection and debt cancellation coverage. The OCC also issued specific guidance relating to income tax refund anticipation loans, noting that such products present safety and soundness and compliance risks and must be closely monitored.

The OCC also discussed its efforts to support community banks, noting the importance of community banks to small business and the prevalence of community banks in the federal banking system. According to the report,  “the OCC seeks to tailor its supervision to a bank’s size and complexity, factors these differences into its rules and guidance, provides alternate ways to satisfy regulatory requirements, uses regulatory exemptions and transition periods, and provides tools that can help community banks meet their operational and competitive challenges.” The OCC also offers tools to assist community banks, including the new cybersecurity tool, a portfolio-level stress test tool for commercial real estate loans, and a tool to develop customized financial reports. Finally, the OCC encouraged community banks to collaborate for efficiency, including joint purchasing and combining back-office tasks.