Southeast Bankers Outreach Forum - September 21, 2015

Banking Forum Considers Cybersecurity, Other Challenges

Hosted annually, the Southeast Bankers Outreach Forum aims to foster conversations between supervisors and community bankers across the region. The event featured presentations by Federal Reserve System staff and other industry experts on topics of importance to bankers while shedding light on some high-priority risks and issues on examiners' minds.

Michael Johnson, executive vice president of the Atlanta Fed's supervision and regulation division, opened the forum with welcoming remarks, affirmed the importance of such outreach events, and encouraged the attendees to engage in dialogue with the speakers and Reserve Bank staff in attendance. 

Economy improving, but uncertainty persists
Scott Hughes, director of the Atlanta Fed's risk analysis unit, began with a broad overview of national and regional economic and banking conditions. The U.S. economy continues to expand modestly, but uncertainty about the outlook persists, he said.

Stronger economic fundamentals, in turn, have had a positive effect on banking conditions in the region. Although the overall message is one of improvement, the industry is still not back to where it was prior to the financial crisis and recession, Hughes noted.

Accounting changes on the horizon
Joanne Wakim, assistant chief accountant with the Fed's Board of Governors, provided an update on changes to the estimation of credit losses being implemented under revisions to generally accepted accounting principles. Wakim noted that most banks are already collecting data needed to comply with the new guidance and that any reasonable approach may be used to meet new expectations. The Financial Accounting Standards Board expects to issue the standards by the end of 2015, while implementation for community banks is likely to occur at the start of 2019.

High-priority risks
Cybersecurity remains a critical concern for the financial services industry. Tony DaSilva, a subject matter expert in the payment systems area and frequent speaker on cybersecurity, provided a perspective on current trends and developing concerns as well as the most recent guidance issued by regulators to industry stakeholders, including the FFIEC's cybersecurity assessment tool. DaSilva emphasized the importance of Board oversight and its understanding of cyber-risk as an enterprise risk management issue, not just an information technology issue.

Brittany Farner, a senior examiner in the consumer compliance area, covered common violations noted during examinations, emerging issues in the current banking environment, and risks that are on the horizon. She encouraged ongoing dialogue between bank management and the assigned case manager, and provided resources for bankers to help ensure compliance.

Director of examinations Rick MacNamara concluded this section of the forum with a comprehensive discussion of the essential elements of an effective BSA/AML compliance program. He used real-life examples of compliance failures and their repercussions to highlight key issues and potential pitfall.

Varied factors driving consolidation
The banking industry has seen unprecedented change over the past decade, including a wave of consolidation, said keynote speaker Brian Branson, managing director at Stephens Inc. Several factors, including revenue headwinds, rising expenses, and succession planning needs are driving consolidation in the industry, he said.

Similar to the national picture, the Southeast banking landscape has grown increasingly concentrated since the financial crisis. During that time, the number of banks in the region shrank by nearly 23 percent, to about 1,400 at the end of the second quarter, Branson said.

Feedback from this year's forum was very positive, and a number of topics were suggested for next year's event.