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The recent conference on risk management in the banking industry, presented by Prosight (formerly RMA) highlighted key trends and challenges that banks face as they navigate an evolving landscape impacted by technology, regulatory changes, and economic uncertainties. Below is a high-level summary of the major points discussed in key sessions.

Community Bank CRO Panel

A panel of Chief Risk Officers (CROs) from community banks addressed key operational risks for 2025, emphasizing concerns around fraud, financial crime, and cybersecurity. Community banks, often reliant on vendor solutions for advanced security measures, face challenges in educating customers about cyber risks, particularly as many still use checks, which are susceptible to fraud.

The discussion also highlighted the slow adoption of AI technology in community banks due to budget constraints, with some institutions utilizing AI for basic tasks like summarizing meetings but largely remaining cautious in their overall approach.

On growth strategies, panelists stressed the importance of community engagement and maintaining strong relationships with local businesses. While there are mixed signals in the commercial real estate (CRE) market and concerns about slowing multifamily construction, the consensus is that opportunities remain, particularly in industrial warehouses.

The panel agreed that the impact of tariffs has not been as severe as anticipated, but the situation has created an opportunity to allow banks to engage with clients about potential effects on their businesses. Overall, community banks believe their agility and personal service can help them navigate challenges, even as they face long-term issues such as adapting to attract younger customers while maintaining an aging client base.

Community Bank CCO Panel

A Community Bank CCO panel discussed strategic risk management among community banks, focusing on priorities for 2026. Key topics included the use of data analytics for early warning systems to monitor credit activity and concentrations, particularly in CRE. Concerns were raised about cybersecurity threats and the impact of tariffs, with specific industries like office CRE, nonprofits, and construction facing heightened scrutiny due to market uncertainties.

Panelists expressed a cautiously optimistic outlook, noting increased competition and loan demand while emphasizing disciplined underwriting practices. They highlighted the importance of technology in monitoring smaller relationships and adapting to emerging risks, including fraud and inflation.

Talent acquisition and retention were also critical issues, with many banks implementing rotational training programs to further develop existing employees. Overall, the CROs emphasized the need for vigilance and adaptability in navigating the evolving banking landscape.

Mid-Sized Bank CCO Panel

The panel emphasized a diversified approach to assessing trade policy and interest rate risks, advising against betting on only a single outcome. Banks must continuously evaluate multiple scenarios and maintain open communication with clients to understand their strategies in response to potential market changes.

The session also highlighted the importance of stress testing portfolios based on current economic conditions and the need for proactive engagement with clients to monitor impacts from tariffs and interest rates. Current priorities for banks include balancing risk profiles with loan growth and for those active in M & A, enhancing data quality post-acquisition.

The discussion also touched on the evolving role of bankers in a landscape increasingly influenced by AI, urging the adoption of new technologies while ensuring they do not hinder strategic decision-making processes.

Strategies for attracting the next generation of bankers involve showcasing diverse career paths within the industry and adapting to the changing work environment, particularly the challenges from remote work.

Large Bank CCO Panel

The discussion began with exploring AI usage in commercial underwriting emphasizing that while AI tools can enhance efficiency, they must be well-structured and governed. Many banks’ proprietary AI systems, referred to as ‘closed systems,’ primarily rely on historical data, aiming to minimize manual errors. Unfortunately, these systems can be reliant on legacy data, which is typically not complete or always accurate.

Despite advancements, human oversight remains crucial to ensure the accuracy of AI-generated information. The challenges ahead will involve integrating these AI solutions, ensuring data quality, and establishing robust controls.

Tariff uncertainty poses significant challenges for banks as their clients navigate strategic plans amidst unpredictable conditions. The panel highlighted the need for early warning indicators to proactively monitor portfolios and understand industry impacts. Communication with clients is vital, especially as they adapt to changing market conditions. Strategies include stress testing high-risk sectors and maintaining regular meetings to assess the evolving landscape and prepare for potential downturns.

Banking Disruptors

Key findings from a recent survey revealed that three-quarters of executives see potential in new business models and mergers and acquisitions, while nearly all view AI as more of an opportunity than a risk. However, there is a significant gap in communication regarding AI strategies between management and employees, with the majority of staff lacking confidence in using AI in their roles. As banks seek to integrate AI across various functions, they face challenges in determining acceptable risk levels and establishing appropriate controls.

There are also concerns about geopolitical risks, with the need to be aware of the vulnerability of supply chains. The rise of private equity and non-bank financial players, along with the acceleration of digital assets such as stablecoins pose other disruptions.

Regulatory changes are shifting toward more tailored, risk-based supervision focusing primarily on financial risk. The agencies are also actively considering possible reduction in capital requirements and the facilitation of bank mergers. While this permissive environment encourages innovation, it also requires banks to adapt quickly to stay competitive. Ultimately, banks must evolve from a risk-prevention mindset to a more proactive one of strategic resilience to navigate these disruptions effectively.

How to Successfully Build Trust in AI

There is a growing challenge in managing AI risks within banking, and with the absence of a definitive playbook, there is a need for a thoughtful approach that incorporates transparency and accountability. Key challenges discussed included balancing innovation with regulatory compliance, addressing cyber threats, and meeting evolving customer expectations in digital banking. A successful AI implementation requires clear objectives, a strong data foundation, early stakeholder engagement, and emphasizing the importance of data quality and governance.

A key element of successful AI implementation is the significance of establishing clear AI guardrails to address ethical practices to ensure trust in the AI systems. The “human in the loop” approach was recommended to maintain oversight and validate AI outputs. A growing best practice is to engineer a process that starts with human input and direction, allowing AI to do the heavy lifting through data, then human verification and validation at the end of the process.

As AI technologies evolve, mid-sized banks are expected to enhance their capabilities, improving customer experience and operational efficiencies while navigating the associated increased risks, particularly related to data privacy.

Chief Risk Officer Panel

Three Chief Risk Officers from different sized banks discussed the evolving risk landscape in banking, emphasizing the need to strengthen risk governance in response to regulatory changes. Key priorities for 2026 included building trust within institutions, enhancing operational resiliency, and improving data governance.

The panel highlighted the risks associated with the rapid pace of technological advancements, particularly in AI, which poses challenges in fraud and confidential data management. Due to this, there is a requirement for all banks to invest in protective measures. Smaller banks face resource constraints, necessitating strategic trade-offs in prioritizing risk management efforts.

Panelists noted concerns about emerging economic risks, including localized issues in CRE and shifts in consumer spending. While a recession is not an immediate concern, CROs are vigilant for early warning signs. The discussion also covered the importance of proactive governance frameworks for AI and digital assets, as well as the necessity of adapting risk management strategies to align with corporate goals.

Chat with the OCC

The fireside chat with the Deputy Comptroller of the OCC began with a comment about how the overall health of the banking system is strong, with high profitability and capital levels. However, the OCC emphasized the need for vigilance amid economic uncertainty, particularly regarding fraud and cybercrime. Credit management remains stable, with non-current rates below historical averages, although some softness is noted in retail sectors like credit cards and auto loans.

The OCC’s priorities moving forward include streamlining mergers and acquisitions, tailoring risk-based supervision for community banks, and reforming capital and liquidity regulations.

The OCC is proactively engaging with AI, recognizing its potential for improving underwriting and fraud detection while acknowledging the associated risks. The Deputy Comptroller noted that while there are risks in innovation, there are also risks to banks from not innovating. Data governance and confidentiality are still critical, especially as banks increasingly rely on third-party providers and digital assets.

Cybersecurity remains a top concern, necessitating a comprehensive approach to operational resilience. Overall, the OCC encourages open communication between bank management and supervisors to preemptively address potential issues and ensure effective risk management.

Concentration Management

There is a critical need for banks to manage concentrations and portfolio risk in today’s uncertain economic and regulatory environment. Panelists stressed that various types of concentrations such as loan types, vendors, and even liquidity—can pose significant vulnerabilities, as evidenced by past high-profile bank failures. Regular monitoring and updating of concentration limits are essential, with a focus on identifying reasonable thresholds and adapting to changing conditions.

To manage these risks effectively, the panel recommended using straightforward metrics like capital amounts and techniques like stress testing and considering peer comparisons for new insights. Strong communication with frontline teams is crucial for identifying potential issues early. When approaching concentration limits, red flags and proactive dialogue allows for timely adjustments in strategy. Ongoing research into emerging risks and a flexible and continuous review process around concentration limits are vital for navigating the evolving landscape of banking risks.

CRE Market Review

A panel of large bank CRE experts expressed cautious optimism regarding geographic expansion of their CRE footprint as interest rates drop and conditions stabilize. Panelists discussed strategies for entering new markets, beginning from existing contiguous locations and then gradually establishing a local presence.

There was also a discussion about lending to private credit, highlighting its specialized nature and the increasing competition in this space. In addition, adding protections like covenants helped reduce risk, while having a positive impact on capital.

Data centers were identified as the most desirable CRE asset type, driven by AI demand and reputable borrowers like Microsoft with long-term leases. Access to nearby power is crucial to the location of these projects.

The retail market is experiencing somewhat of a revival with new concepts and approaches, a popular example being grocery stores with takeout options. Meanwhile, while challenges persist in the multifamily sector, particularly in affordable housing, opportunities remain as oversaturation decreases and demand for traditional mortgages rises.

Protecting Your Brand – Managing Reputational Risk

This session began with panelists differentiating between brand risk and reputational risk, noting that while brand represents a company’s promise, reputation reflects how well that promise is kept. Banks face multiple risks, including fraud, operational issues, and evolving technology threats, which can escalate into reputational crises if not managed proactively. The session stressed the importance of being prepared for crises by maintaining a strong code of conduct, scenario planning, and effective internal and external communication strategies.

The political environment presents additional challenges, with misinformation and employee activism posing risks to reputations. Companies must constantly monitor public perceptions and prepare for potential backlash.

The emerging risks associated with AI usage, particularly its potential biases, were highlighted. Ensuring human oversight in AI applications and preparing for macroeconomic and geopolitical risks are essential for safeguarding reputational integrity.

Economist Review of Current Conditions

The economic outlook presented suggests that while the U.S. economy is not in a recession, it faces challenges that make the environment uncomfortable. Job growth has stagnated, particularly outside the healthcare sector, and while layoffs have not been widespread, consumers remain cautious. {Since this session was recorded, several large layoffs have been announced.} Despite historical indicators showing no signs of an impending recession, concerns persist regarding regional variations and the impact of policy changes, particularly involving tariffs and immigration.

Economic headwinds include a trend towards deglobalization and the potential fallout from US-China tensions, which could further strain labor markets and consumer confidence.

Relating to geo-political challenges, the panel noted that while some firms have absorbed costs from tariffs, the broader implications on production and job opportunities remain unclear and concerning. The session concluded with a discussion of various risks that could exacerbate economic instability, including geopolitical tensions and other potential market disruptions like the rise of digital currency.

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