Nevertheless, while we have seen some evidence of improved risk management, internal controls, and governance at the LISCC firms, they continue to have substantial compliance and risk-management issues. Compliance breakdowns in recent years have undermined confidence in the LISCC firms’ risk management and controls and could have implications for financial stability, given the firms’ size, complexity, and interconnectedness.
The LISCC firms must address these issues directly and comprehensively. Our examinations have found large and regional banks to be well capitalized. Both large and regional banking organizations experienced dramatic improvements in profitability since the financial crisis, although these banks have also faced challenges in recent years due to weak growth in interest and noninterest income.