All the buzz is on virtual trade conferences, and whether the attendee engagement experience is as effective as traditional onsite conference gatherings. Last week, I had the opportunity to experience this for myself at the ABA Virtual Risk and Compliance conference which was originally scheduled in March. Regardless if we meet virtually or in person, industry issues still hold prominence, and our desire to be the advisor of choice with enterprise risk management programs holds true.
Below are select issues we heard throughout the three-day ABA Risk and Compliance conference and we are confident that our risk management practices address these challenges.
Technology Company Oversight
If a technology company is supervised under FFIEC programs, why does a financial institution have to replicate the review procedures? The technology service provider’s due diligence response decreases the financial institution’s amount of needed time and resources allocated for risk management oversight programs. More importantly, financial institutions could defer to the work of the regulators and have confidence that the technology vendor can ensure data integrity, data confidentiality, and continued availability of their services.
Banks may have a role to play in the custody of crypto assets. In one of the virtual sessions, it was stated that about 40 million Americans hold some level of crypto currency. Banks and other companies currently provide custody services for investment certificates, wine, automobiles, etc. A financial institution should be able to provide custody service for the crypto currency keys, a highly valuable asset.
I heard the word “Oligopoly” for the first time during one of the ABA virtual conference sessions to describe the three core banking service providers. Although support for new core providers and other FinTech companies was expressed, I did not hear that oligopolies are bad for everyone, especially the banking industry. Competition is good and the only way for important innovation to proposer.
The #1 risk management event is COVID. The #2 risk management threat is COVID. The point is every immediate risk is a result of COVID. Credit risk will subside when the economy picks up. Cyber risk incidents are growing from state-sponsored actors as COVID and social unrest grows, and people become more susceptible to old threats presented in different ways. And, on a lighter note, as an example of another risk event, COVID is accelerating the debate on the discontinued use of the penny.
On average, the ABA reported there are typically 200-300 per month. We are now at a level of 30 per month. Everyone is wearing a mask and bank robberies are going down, so continue to wear your mask!
One of the biggest threats to the banking industry is banking services leaking out of the banking industry to companies that do not receive the same level of oversight. Although it is a good point, supporting innovation and granting limited banking charters to non-banks is possibly contradictive. Unless of course, you only support innovation by banks or the three core service providers. I believe it is not possible to be in favor of one area – new banking services, FinTech growth, and a level regulatory playing field -- without supporting all three positions.
WolfPAC Solutions —pre and post Covid —offers the unparalleled guidance needed to address many of the issues heard last week at the ABA Risk and Compliance conference. We help you manage risk in a competitive market and regulatory environment to keep your organization secure.