The federal banking system remains sound but faces credit, market, operational and compliance risks, according to the Office of the Comptroller of the Currency (OCC).
The OCC shed light on key risks facing the federal banking system in its Semiannual Risk Perspective for Fall 2023, the regulator said in a Thursday (Dec. 7) press release.
An emerging risk faced by the system is the use of artificial intelligence (AI) in banking, per the release.
The report underscored the overall robustness of the banking system while urging banks to maintain diligent risk management practices, according to the release.
Credit risk is on the rise due to several factors, including higher interest rates, risks associated with commercial real estate lending, inflation, declining corporate profitability and the potential for slower economic growth, the release said. Key performance indicators are already indicating signs of borrower stress across different asset classes.