In This Issue

• Agencies Seek Comment on Large Bank Cyber Standards
• Private Flood Insurance Proposal Aims to Ease Compliance
• ABA, Accenture Release 'Playbook' for Banks on Fintech Strategy
• Treasury Issues Controversial 'Interest Stripping' Final Rule
• Agencies Publish Cyber Assessment Tool FAQs

• Hotel Cutoff for National Ag Bankers Conference Is Friday

Agencies Seek Comment on Large Bank Cyber Standards

 
The Federal Reserve, FDIC and OCC yesterday issued an advance notice of proposed rulemaking seeking comments on a set of enforceable cybersecurity standards for banks with more than $50 billion in assets. The new standards would be designed to supplement, not replace, existing interagency requirements and guidance for cyber resilience.

The agencies said they are considering three main approaches to implementing the standards: proposing minimum requirements for a cyber risk governance framework, similar to previous interagency supervisory guidelines; proposing regulations containing specific cyber risk management standards in five categories (cyber risk governance; cyber risk management; internal dependency management; external dependency management; and incident response, cyber resilience and situational awareness); and, most prescriptively, proposing standards that include specific objectives in each category.

Possible objectives in the aforementioned categories would include a written, board-approved, enterprise-wide cyber risk management strategy and risk appetite; “adequate” board expertise in cybersecurity; senior cybersecurity managers who report independently to the board; assessments of cybersecurity risk management at the business unit level; cyber risk built into an independent risk management function; inventories of all internal and external assets that affect cyber risk management; real-time monitoring of external dependencies; and transition and backup plans in the event of a successful cyber attack.

Along with bank members of the Financial Services Information Sharing and Analysis Center, ABA has been leading cooperative, private-sector efforts to improve the cyber-resilience of the financial system. ABA will carefully review the proposal and provide comments by Jan. 17, 2017. Read the proposal. For more information, or to provide feedback, contact ABA’s Denyette DePierro.

Private Flood Insurance Proposal Aims to Ease Compliance

 
The FDIC, OCC, Federal Reserve, Farm Credit Administration and National Credit Union Administration yesterday issued a proposed rule implementing the 2012 Biggert-Waters flood insurance reform law’s efforts to stimulate a robust marketplace for private flood insurance that would offer a competitive alternative to the National Flood Insurance Program.

The proposal, which revisits a proposed rule issued three years ago, includes several provisions responsive to concerns ABA raised in its comment letter. Among them are an expansion of the compliance safe harbor included in the original proposal and granting discretion for lenders to accept, under certain conditions, policies that do not meet the statutory definition of private flood insurance.

The proposal also includes a carve-out for insurance-like coverage provided by mutual aid societies. Comments on the proposal are due 60 days after it is published in the Federal Register. Read the proposed rule. For more information, contact ABA’s Anjali Phillips.

ABA, Accenture Release 'Playbook' for Banks on Fintech Strategy

 
As banks continue to grapple with a rapidly evolving technological environment and the massive growth of fintech startups--and with billions of dollars in revenues at stake--ABA and Accenture on Monday released a members-only Fintech Playbook to help banks understand how and when they can most profitably partner with fintech companies.

According to Accenture, banks that invest in fintech stand to gain up to $20 billion collectively in operating income by 2020, while those that don’t could lose as much as $15 billion in revenues during the same period. But with thousands of startups to invest in or partner with, the transition can be daunting.

The playbook offers a four-phase approach--establish a baseline, close gaps, focus on the customer and drive transformational change--that addresses channels, lines of business and bank platforms and processes. It also includes sample worksheets to help identify strategic priorities, identify top IT investment priorities and select potential fintech partners.

“This is clearly a transformative time for the financial services industry. The rapid convergence of banking and technology is reshaping how banks and their customers interact,” said ABA President and CEO Rob Nichols. “This tool will help banks, particularly community banks, navigate the dynamic field of technological innovations.”

Download the Fintech Playbook. View more resources at aba.com/fintech.

Treasury Issues Controversial 'Interest Stripping' Final Rule

In response to comments from ABA and other groups, banks scored a win last week when the Treasury Department issued a revised final rule to address alleged “interest stripping” that carved out debt instruments issued by most financial institutions from an important portion of the rule. The Treasury proposal was targeted at transactions that use inter-affiliate debt to take deductions in a higher-tax jurisdiction and receive the income in a no- or low-tax jurisdiction, but ABA noted that it was far broader than headlines implied, with implications for ordinary operations of banks of all sizes.

In response to comments from ABA and others about the comprehensive regulatory and audit regime to which banks are subject, Treasury carved out an exception to the rule for debt instruments issued by an “excepted regulated financial company,” including insured depository institutions, bank holding companies and certain savings and loan holding companies. Treasury did not lift documentation requirements for regulated entities, but S corporations are exempt from all aspects of the final rule.

ABA’s request for a less punitive approach to documentation errors was acknowledged. Documentation under the final rule is treated as timely so long as it is prepared by the time the filer’s federal income tax return is filed. The final rule also provides a rebuttable presumption for documentation errors provided that covered entities are otherwise in compliance, instead of per se re-characterization of the debt to equity as proposed.

Treasury also delayed the implementation date, with the final rule coming into force only for debt instruments issued on or after Jan. 1, 2018. ABA will continue to review the 518-page final rule and provide analysis as needed. Read the final rule. For more information, contact ABA's John Kinsella.

Agencies Publish Cyber Assessment Tool FAQs

 
The Federal Financial Institutions Examination Council on Monday published frequently asked questions related to its Cybersecurity Assessment Tool. Released in 2015, the tool is a voluntary resource designed to help banks determine their risk profile, identify cybersecurity risks and assess preparedness. The FAQs address questions received by FFIEC member agencies from financial institutions over the past year. View the FAQs. For more information, contact ABA's Heather Wyson-Constantine.

Hotel Cutoff for National Ag Bankers Conference Is Friday

 
The hotel reservation cutoff for the ABA National Agricultural Bankers Conference--to be held Nov. 13-16 in Indianapolis--end this Friday, Oct. 21. Attendees must register by that date to take advantage of the discounted room rate.

Breakout workshops at this year’s conference will cover price risk, negotiation, marketing, data analysis and more. General session speakers will include Hormel Food’s Tom Day, Kansas State University Professor of Agricultural Economics Barry Flinchbaugh and Belstra Milling Company President and CEO Malcolm DeKryger. For ag bankers new to the field, a special track will focus on projecting cash flow, lender liability and improving loan repayment capacity. Register now.