Large banks face fundamental challenges with operational risk as they try to adapt their business models to changes in the servicing, trading, and securitization business, a report from the Office of the Comptroller of the Currency said yesterday.
The report by a group of senior OCC officials and academics from law, policy, and economic departments, found that large banks continue to incur legal, operational, and reputational costs tied to weak underwriting and servicing deficiencies in the run up to the financial crisis.
"Deficiencies in mortgage servicing and foreclosure practices continue to present significant reputational risk, and the cost of litigation, remediation, and penalties is dampening profitability and productivity," the report said.
The report said the top risks facing national banks and federal savings associations include the lingering effects of the weak housing market, challenges related to slow economic growth, and the potential that banks may take excessive
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