This Week in Credit Risk: The Rate Hike’s First Week, Third-Party Risk, and an OCC Workshop

Variable Rate Borrowers Are Repricing

Prime-based loans repriced the day after the decision, and SOFR-based loans reprice at their next reset. For borrowers already running tight on cash flow, the added interest expense adds up quickly. And 16 of 18 Fed policymakers now project a higher rate by year-end, four of them two more increases, so the pressure may not stop here.

For a credit team, this is a debt service coverage question. A borrower already near policy minimums may have slipped below them, and could slip further after another increase. Rerun coverage for floating rate exposures at current rates, and look at what another increase would do before it happens.

A Proposed Overhaul of Third-Party Risk Guidance

On September 11, the FDIC, Federal Reserve, NCUA and OCC proposed overhauling third-party risk management guidance, saying the current guidance unintentionally encouraged overly process-driven approaches. In a separate statement, the Fed, FDIC and OCC called out core provider practices that unreasonably limit community banks’ ability to negotiate contracts or conduct due diligence.

It fits a broader pattern this year: supervisors putting more weight on substance and less on process. For credit teams, that same shift means documentation should show the analysis, not just check the boxes.

An OCC Credit Risk Workshop for Community Banks

The OCC is hosting a Credit Risk Workshop on September 30, 2026, in Cleveland, for directors and senior management of OCC-supervised community banks. It is worth the trip if you can make it.

Frequently Asked Questions