Regulatory Changes, Cyber Threats Highlighted at Southeast Bankers Forum

Real estate conditions, consumer compliance, and cybersecurity were the major topics discussed at the Federal Reserve Bank of Atlanta's Southeast Bankers Outreach Forum, held on September 28, 2017. The event, geared to community and regional banks, was hosted by the Atlanta Fed's Supervision and Regulation Division to provide insights into banking conditions and regulatory activities.

"Banking conditions presently are very good, but we like to say risks are ever present," Steve Wise, vice president of the Bank's Community and Regional Bank Supervision Group, told the gathering.

A "hot topics" panel addressed revisions to the Federal Financial Institutions Examination Council consumer compliance rating system for bank exams that began on March 31, 2017. Tony Curtis, a portfolio senior examiner in consumer affairs at the Atlanta Fed, said the new rating system gives more details than the system it replaces, which was created in 1980. There was also a discussion of possible indicators of redlining and best practices in fair lending for banks to follow.

The forum also outlined some changes that are in store next year related to new rules about the Home Mortgage Disclosure Act. Jacob Stewart, an examiner at the Atlanta Fed, said banks need to start preparing their staffs for the increased volume and granularity of information that will be required reporting for each loan.

Lara Lylozian, assistant chief accountant with the Federal Reserve Board, provided an update on the status of CECL (current expected credit loss model) implementation, the revised accounting standard for measuring expected credit losses. She advised community bankers in particular that the Board would not be looking for complex estimation models to comply with new guidance. She added that now is the time to prepare for full implementation of the standard by collecting and maintaining relevant loss data.

Tony DaSilva, an Atlanta Fed subject matter expert in community banking, discussed the pervasive cybersecurity threat for banks. He noted that such attacks are on the rise at institutions with lower asset sizes and potentially less capability for managing the incidents. "Cybercrime is a well-financed, organized business," he said.

Cyber offenders have changed tactics, mainly directing their attacks toward tricking people into infecting systems or stealing credentials rather than relying on technical exploits, DaSilva noted. Banks need to incorporate simulated cyberattacks into their training and testing, he said.

The forum ended with a "fireside chat" that provided a policy perspective on consumer compliance priority issues. Suzanne Killian, senior associate director at the Federal Reserve Board's Division of Consumer and Community Affairs, and Juan Sanchez, an Atlanta Fed vice president of Consumer Compliance and the International Supervision Group, discussed possible revisions to the Community Reinvestment Act (CRA), implications from fair lending and Unfair or Deceptive Acts or Practices findings, and Consumer Financial Protection Bureau coordination. Killian and Sanchez pointed out that while there has been a lot of discussion about the modernization of the CRA, revisions would require congressional action and interagency involvement.