The Office of the Comptroller of Currency (OCC) released its semiannual risk report Wednesday in which it cites growing concern for indirect auto lending. The OCC’s National Risk Committee monitors emerging threats to the federal banking system’s safety.
Limited lending opportunities and intensifying competition in the auto lending space, the report states, have led to loosened standards in underwriting.
“The OCC sees signs that credit risk is now building after a period of improving credit quality and problem loan clean-up,” the report states. ”Examiners have observed erosion in the underwriting standards for syndicated leveraged loans, as well as loosening of standards and increased layering of risk in the indirect auto market.” The OCC also noted that these signs of risk are common in a competitive market where growth is accelerating, but also stated it will review underwriting practices for new or renewed loans in banks’ indirect auto loans as part of its supervisory priorities for the next 12 months.
