Thomas Curry spoke to the AICPA Banking Conference in Washington this week.  He warned about continuing problems with banks in the US.  Strategic risk, or the adverse financial consequences that can result from poor business decisions or poor implementation of business decisions, is rising in the decisions of some banks to venture into new lines of business with the potential to generate higher profits—but also bigger losses—than in their traditional activities.  When banks expand into new products and services, they may reach beyond their technical competence, risk tolerance, and capital adequacy.

Operational risk arises from failure in the performance of bank systems and bank personnel. During the financial crisis, many banks cut back their investment in this area, making it harder for them to keep up with emerging challenges in such areas as cyber security and regulatory compliance. Speak to a lawyer hired by a bank in the compliance area: they are successful at work if they get to the office in the morning, doing nothing, and leave at the end of the day.

In periods of slow growth, banks reaching for yield, taking on more interest rate or credit risk to maximize returns. Do they make appropriate allowances for loan losses?    Curry Addresses the AICPA Banking Conference