Fed points to non-financial risks at large US banks

US-based G-Sibs show weaknesses in AML, internal audit and IT risk, Fed says

Federal Reserve

The Federal Reserve says most of its outstanding supervisory findings for both US-based and foreign-owned large banks concern non-financial risks.

Concerns regarding US-based global systemically important banks’ anti-money laundering programmes, internal audit functions and IT risk management make up more than 60% of the supervisors’ outstanding findings, the report shows.

These non-financial risks also make up over 90% of findings for foreign-owned banks, the Fed’s November 26 supervision and regulation report shows.

“Supervisors will be following developments in information technology, cyber security and data management, such as the increasing use of third-party cloud services, artificial intelligence and evolving retail digital platforms,” the report says.

The Fed warns that banks face challenges caused by “increased competition for core customer relationships, and volatile or reduced revenues due to technology challenges in certain business lines”.

Risks from banks’ capital and liquidity levels remain low, according to the Fed’s assessment.

“Currently, all large financial institutions regulated by the Federal Reserve maintain enough liquid assets to withstand a month of stressed liquidity outflow,” the report says.

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