Banking and Finance Law Daily Wrap Up, FINANCIAL STABILITY—OCC report highlights resilience, potential areas of concern, (May 8, 2026)

By Jeff Williams

The report noted potential risks posed by AI, as well as conflicts in the Middle East.

The trends of banks showing “robust” revenue growth and “strong” balance sheets, “with capital ratios and liquidity high historical standards,” have “generally persisted” so far this year, while the economic outlook for 2026 “anticipates that consumer spending will continue to support growth” and the credit risk within the federal banking system “remains manageable in aggregate,” according to the Semiannual Risk Perspective for Spring 2026 released by the Office of the Comptroller of the Currency (OCC).

The OCC also characterized various key financial risk areas, including stating that past-due and nonaccrual loans, as well as net charge-offs “remain below long-term averages in most loan portfolios” and OCC-supervised banks have “manageable exposures to higher-risk borrowers” amid a “modest increase" in past-due loans in the consumer credit market, “driven by borrowers with weaker credit scores,” the report said. While credit conditions and refinancing risk in some segments of commercial real estate lending and private credit markets “warrant ongoing monitoring,” the OCC said.

In commercial real estate (CRE), the agency said, several property types “continue to experience headwinds” and while those headwinds have not resulted in significant credit defaults, “refinance risk merits continued attention” as a "substantial volume” of CRE loans originated in a lower-interest environment will mature in the next several years and will need to be refinanced. In the private credit market, there are signs of weakening in some areas, meaning “careful monitoring of borrower performance and refinancing risk is increasingly important,” the OCC said.

The regulator also noted that cyber threats and fraud “remain a concern,” saying: “Cybercriminal groups targeting the financial sector are increasingly sophisticated and foreign state-sponsored actors continue to pose a threat,” with the risk elevated due to “increased geopolitical tensions related to the Middle East conflict.” Among other things, the OCC also pointed to several AI-related risks, including that it “can also be used to facilitate fraud and enable automated reconnaissance, rapid vulnerability discovery and exploitation, targeted social engineering, and adaptive malware that can evade traditional security defenses.” In addition, “increasingly advanced” artificial intelligence tools are being used to assist with cybersecurity functions and a “sound understanding of the potential benefits and possible risks associated with these advanced tools can be important for cyber risk management,” the report said.

Geopolitical tensions “increase sanctions and money laundering risk, straining bank compliance systems” and that the OCC “continues to look for opportunities to tailor bank supervision and regulations to risk and complexity and reduce burden for its regulated institutions so they can support economic growth,” according to the report. Those efforts include a proposed rule the OCC issued in April in conjunction with changes the Financial Crimes Enforcement Network (FinCEN), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) amend requirements for supervised institutions to establish and maintain effective risk-based anti-money laundering and countering the financing of terrorism (AML/CFT) programs.

Regarding the overall economic environment and bank performance, the OCC said that the U.S. economy exhibited “moderate but resilient” growth in 2025, “despite notable volatility across quarters and emerging structural headwinds,” with real gross domestic product expanding by 2.1 percent for the year, which slowed in the fourth quarter amid the federal government shutdown and “softer” household demand.

The OCC also stated that while inflationary pressures “have eased from prior peaks,” but “Persistently elevated service-sector inflation, accelerating goods inflation, and high shelter costs have kept inflation sticky.” It also concluded that the U.S. economy and financial markets have been more resilient to the conflicts in the Middle East than countries in Asia and Europe, adding that if “disruptions to the flow of energy and other commodities, such as fertilizer, from the Middle East persist, their impact on foreign economies is likely to grow and may affect U.S. firms and banks with exposure to these economies.”

RegulatoryActivity: BankingOperations FinancialStability FinTech