2013 Banking Outlook Conference - February 28, 2013

Federal Reserve Bank of Atlanta
1000 Peachtree Street N.E.
Atlanta, GA 30309

Cyber threats, reputational risk highlight conference
The Supervision and Regulation division's annual Banking Outlook Conference on February 28 brought more than 200 bankers and regulators to the Atlanta headquarters to discuss an array of issues affecting depository institutions and the nation's financial system.

Panels and presentations covered topics including concerns and opportunities facing Southeast banks, the nation's economic outlook, regulatory matters, the impact of technology on bank customers, and growing cyber threats to banks.

Governor Raskin says reputations matter
In the day's keynote speech, Fed Governor Sarah Bloom Raskin addressed the importance of reputational risk for individual banks and the entire financial system. She said that much of the public mistrusts financial institutions, particularly the largest ones. This mistrust results in part from the widespread perception that taxpayers rescued the big banks and have not yet been held to account for putting the nation's financial system in danger, Raskin explained.

"Even as the economy comes back to life, our memory of these events is still sharp, and the reputational damage suffered by U.S. financial institutions during the crisis endures," Raskin said.

To better safeguard reputations, she said that bank supervisors, managers, and directors should pay closer attention to existing and potential risks to banks' reputations. A loss of credibility can hurt business. Raskin noted that banks could lose deposits or have difficulty launching fee-generating products if customers and prospective customers hold banks in low regard.

Cyber security a daily race with bad guys
Some bankers at the conference also cited reputational risk as an important concern. Alongside such challenges as the growing costs of regulatory compliance and the difficult search for profitable lines of business, bankers said online threats have become a high priority. During a panel discussion on Southeast banking conditions, Regions Financial Corporation's CEO Grayson Hall (pictured) said cyberattacks pose a real danger to a bank's brand and reputation. Online threats are not new, but the nature of the threats has changed, Hall observed. Rather than simply trying to steal money from customers or the bank, well-organized cyberintruders today often intend to disrupt the bank's capacity to operate.

"It literally is a daily race to stay in front of these folks," said Hall. "It threatens our reputation."

Technology also spawns opportunity
Technology not only brings risk, but it also presents opportunities if banks embrace it, said Brett King, the day's last speaker. An entrepreneur and author of books about how technology affects consumer behavior, King warned bankers that future customers will be unwilling to visit traditional bank branches and will turn to faster, easier ways of handling their financial business.

Business in branches has already slipped dramatically, King said. The average number of transactions conducted each month in a physical branch fell by more than half from 2000 to 2012, and by a third from 2010 to 2012. The big drop between just those two years, he noted, resulted from the widespread adoption of smartphones. Many people use their smartphones to transact personal financial business.