San Francisco Region
AzBA Annual Meeting and Convention
Regulatory Spotlight
New Administration: Regulatory Environment
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FEDERAL DEPOSIT INSURANCE CORPORATION
Risk Management & Compliance Risks
 Commercial Real Estate (CRE) Concentrations
 Cybersecurity
 Corporate Governance
 Current Expected Loss Model (CECL)
 Consumer Harm / Compliance
 Competition (Capital Planning, Financial Innovation)
 Changing Interest Rates
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FEDERAL DEPOSIT INSURANCE CORPORATION
Where Are We in the Banking Cycle?
WO- Risk Analysis Section
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NPLs: Non-performing loans
LDRs: Loans to deposit ratios
FEDERAL DEPOSIT INSURANCE CORPORATION
Commercial Real Estate Concentrations
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FEDERAL DEPOSIT INSURANCE CORPORATION
CRE Concentrations Management
 How are you managing your concentrations
differently today?
 Management should:
• Adopt appropriate strategies to mitigate risk
• Understand vulnerabilities to stress and market conditions
• Review how concentrations are funded
 Board should:
• Set prudent risk limits
• Ensure clear internal guidance regarding acceptable risk exposures
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FEDERAL DEPOSIT INSURANCE CORPORATION
Cybersecurity
 How Can You Prepare:
• Train employees and customers
• Know who to contact and respond quickly
• Implement continuous monitoring and timely patch management
• Move oversight from the backroom to the boardroom
 Resources:
• Supervisory Insights Journal – Cybersecurity Focus (February 2016)
• FDIC Consumer News – Special Cyber Edition (March 2016)
• Vendor Management Technical Assistance Video (March 2016)
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FEDERAL DEPOSIT INSURANCE CORPORATION
Corporate Governance
 How Can You Prepare:
• Key Elements to Program:
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Understand risk profile, i.e. Bank Secrecy
Establish appropriate risk appetite
Create a dynamic strategic plan
Develop policies and monitor implementation
Maintaining robust internal controls and audit program
 Resources:
• Supervisory Insights Journal – Corporate Governance (April 2016)
• Corporate Governance Technical Assistance Video (July 2016)
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FEDERAL DEPOSIT INSURANCE CORPORATION
Current Expected Credit Loss (CECL)
 How Can You Prepare:
• Reasonable and supportable forecast, gather data
• Scale the methodology for the size and complexity of your institution
• Estimate capital level needed for any one-time adjustment to retained
earnings
 Resources:
• FIL-39-2016 issued June 17, 2016, and FAQs
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FEDERAL DEPOSIT INSURANCE CORPORATION
Consumer Harm / Compliance
 How Can You Prepare:
• Knowledge of Consumer Compliance – training, compliance culture
• Reach out to Regulators: CMS sophistication increases with size,
complexity, and risk profile
• Revised Consumer Compliance Ratings System
• Focus on Consumer Harm (Fair Lending)
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FEDERAL DEPOSIT INSURANCE CORPORATION
Competition
 How Can You Prepare:
• Capital Planning: Does plan capture risk, provide a forward-looking
view, and incorporate budgeting and strategic planning?
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Do you have a framework for preserving capital?
 Financial Innovation
• Identify the “audience”
• Board & Management strategic fit, expertise
• Third-Party Risk Management (FIL-44-2008)
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Risk Assessment
Due Diligence
Oversight
FEDERAL DEPOSIT INSURANCE CORPORATION
Changing Interest Rates
 Fundamental: What is your overall Asset & Liability
Management strategy in a rising rate environment?
 How Can You Prepare:
• Review your liquidity strategy and funding mix,
including listing service, uninsured, and surge deposits
• Consider potential interest rate restrictions during
contingency funding planning
 Resources:
• Interest Rate Risk Technical Assistance Video
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FEDERAL DEPOSIT INSURANCE CORPORATION
Preparing for the Future
 FDIC: Partner to Navigate 7 C’s
 Lessons Learned
 Regulatory & Industry Objectives
 Strong Resilient Banking Industry
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[email protected] Office: (415)-808-8052
FEDERAL DEPOSIT INSURANCE CORPORATION