Reuters | By: Lisa Lambert | Fri Jul 7, 2017 | 6:12pm EDT:
Many of the major risks U.S. banks face lay beyond their control, according to a review released by banking’s top federal regulator on Friday that found the sector’s financial performance remains strong.
The U.S. Office of the Comptroller of the Currency found that risks to banks lurk in competition from nonfinancial lenders and in the rapid evolution of money laundering and terrorism financing methods.
The OCC pointed to heavy reliance on third-party servicers and vendors as a place where banks could be vulnerable to a variety of threats, as they rely on outside firms to carry out critical activities or provide cyber security.
“Many banks have increasingly leveraged and become dependent on third-party service providers to support key operations within their banks. Over time, consolidation among service providers has resulted in large numbers of banks (becoming) reliant on a small number of service providers,” according to the regulator.
It added that that can create “concentrated points of failure for certain lines of business or operational functions for a large segment of the banking industry.”
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