Financial Institutions

Friday, 27 October 2017

FIL-22-2017: Adoption of supervisory guidance on model risk management

Written by Rehmann Team

The FDIC is adopting the Supervisory Guidance on Model Risk Management previously issued by the Fed and the OCC. However, it is not expected to apply to FDIC-supervised institutions with under $1 billion in total assets, unless the institution's model use is significant, complex, or poses elevated risk to the institution. The guidance addresses supervisory expectations for model risk management, including: model development, implementation, and use; model validation; and governance, policies and controls. The FDIC is adopting this guidance due to bank’s increasing use of and reliance on data-driven, quantitative tools...

Friday, 04 August 2017

Shortage of appraisers raises concerns

Written by Rehmann Team

The FDIC, the Board of Governors of the Federal Reserve System, the OCC, and the NCUA are aware of the issues related to the shortage of certified and licensed appraisers, and how that impacts timely real estate appraisals in rural areas. The agencies have issued an advisory that is not a new policy, but rather highlights the authorization for temporary practice permits and temporary waivers. Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) requires that appraisals for federally related transactions (FRT) be performed by individuals who meet certain certification or licensing requirements. An FRT is any real estate transaction that the FDIC or any FDIC-regulated institution engages in or contracts for, and requires the services of an appraiser...

Friday, 04 August 2017

Residential sales values rebound since great recession

Written by Rehmann Team

Regionally and nationally, the value of residential homes has generally increased following the recent financial crisis. In most regions, home values reached their lowest levels in from 2009 through 2011, and have rebounded above levels seen in 2006. “Home prices continue to climb and outpace both inflation and wages,” says David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices...

Since 2015, more than 244 lawsuits have been filed against businesses, including some banks, alleging that individuals with disabilities are being denied access to goods and services due to inaccessible websites. Specifically, Title III of the ADA requires companies to “provide auxiliary aids and services (including accessible electronic information technology (EIT) for individuals with visual, hearing, motor and cognitive disabilities) to ensure effective communication, absent an undue burden or fundamental alteration to the goods and services.” It is unlikely that Department of Justice (DOJ) or a court would conclude that website accessibility modifications would cause undue burden to a bank; therefore, non-compliance with the ADA opens a bank to legal and financial risk. Since definitive standards have not yet been developed, and are not expected to be developed by the DOJ until 2018, technical standards of WCAG 2...

Friday, 04 August 2017

Supervisory guidance on model risk management

Written by Rehmann Team

The FDIC’s recent supervisory guidance on model risk management provides financial institutions with detailed information that will help them prepare for supervisory examinations related to model risk management. The guidance addresses: model development, implementation and use; model validation; governance, policies, and controls. However, the guidance does not apply to institutions with under $1 billion in total assets “unless the institution's model use is significant, complex, or poses elevated risk to the institution.” Financial institutions increasingly rely on quantitative analysis of complex modeling for much of their decision making, including enterprise risk management, underwriting, valuing instruments and positions, measuring risk and determining adequate capital ratios, among other financial decisions...

Friday, 04 August 2017

Cybersecurity assessment tool updates

Written by Rehmann Team

The Federal Financial Institutions Examination Council (FFIEC) has released an update to the Cybersecurity Assessment Tool (CAT). While there were no changes to the questions on the Inherent Risk Profile Input or the declarative statements of the Cybersecurity Maturity Input, the updates address changes to the FFEIC IT Examination Handbook and provide more response options that allow financial institution management to include additional behaviors, practices and processes to better represent current practices that support its CAT. The FFIEC CAT was initially developed as voluntary guidance to help management determine the institution's risk profile and cybersecurity preparedness by providing a repeatable and measurable process, including: Inherent risk profile – identifies the risk by the types, volume, and complexity of the bank’s technologies and connections, delivery channels, products and services, organizational characteristics, and external threats, notwithstanding the bank’s risk-mitigating controls. Cybersecurity maturity – evaluated in five domains: Cyber Risk Management and Oversight, Threat Intelligence and Collaboration, Cybersecurity Controls, External Dependency Management, and Cyber Incident Management and Resilience...

Monday, 22 May 2017

Preparing for CECL: What you should be doing now

Written by By: Heidi Cieslik, CPA, and Heather Funsch, CPA

Last year, the Financial Accounting Standards Board (FASB) finalized its long-awaited current expected credit loss (CECL) model for credit impairment. Described by the American Bankers Association as “the biggest change to bank accounting ever,” CECL replaces the current incurred loss model with a forward-looking approach. Although the new standard doesn’t take effect for several years, financial institutions and other affected organizations should be preparing for it now. Perhaps the most critical step is to evaluate the ability of your information technology (IT) systems and data collection processes to generate the information needed to calculate the more complex and predictive estimate...

The 1996 Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) requires federal financial institution agencies, including the Board of Governors of the Federal Reserve System, the OCC, the FDIC and NCUA (by choice) to conduct a review of their rules at least every 10 years to identify outdated or unnecessary regulations. This 2016 Report focused on the effect of regulations on smaller institutions, such as community banks and savings associations. To collect input and complete the review, RFCs were published in the Federal Register and public outreach meetings and town halls were hosted. Altogether, the agencies received more than 250 comment letters from financial institutions, trade associations, and consumer and community groups, in addition to in-person comments at outreach meetings...

Tuesday, 02 May 2017

Are de novos on the rise?

Written by Rehmann team

Recent FDIC research on new bank formation since 2000 highlights both the economic benefits of de novo banks and their vulnerability to economic shocks. For example, of the 1,000 new banks formed between 2000 and 2008, just 63% were still operating as of September 2015, but they held $214 billion in total loans and leases. The failure rate of newly established banks was more than twice that of small, established banks. Additionally, economists at the Federal Reserve report that economic conditions alone — including a long period of zero interest rates — significantly contributed to the post-crisis decline in new charters:     De novo formation has always been cyclical...

Wednesday, 03 May 2017

Outdated legacy core systems pose real risks

Written by Rehmann team

Enterprise Content Management (ECM) systems are critical not only to a financial institution’s operation and growth but also its very survival. They facilitate the delivery of products and services to consumers through multiple channels, and handle the security and privacy of enterprise-wide information. They need to be able to anticipate and respond to rapid-fire demands for change from within the bank and from the external marketplace. However, most core systems, created in the 1980s and 1990s, were designed to be utilitarian, based on technology available at the time...

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