Banking

After attending the Public Company Accounting Oversight Board’s (PCAOB) Forum on Auditing in the Small Business Environment, our HORNE Financial Institutions team was reminded of future certainties that require immediate preparations. Regulations are becoming more complex. Regulators are requiring more diligence from publicly traded companies and banks—as well as from their auditors. 

When internal controls breakdown, an organization’s risk of fraud increases significantly. We recently conducted a fraud investigation for one of our clients where management believed funds were missing but had been unable to figure out how they were taken.

The banking industry has been (understandably) shaken by the rise and impact of technologies like automation and artificial intelligence. The audit profession has been similarly shaken. Already, machines can handle a substantial portion of the audit services we provide. Oddly enough for a client service profession, however, it’s virtually impossible to find any information about how tactical audit process changes will impact our clients. A quick Google search shows no articles about what audit clients should expect to experience in the coming seven or so years.

As people move away from physically walking into brick and mortar branches, the banking industry has planted (at least) one foot firmly in the “bank of the future.” This modern structure is built with technology and online platforms, erasing geographic boundaries and introducing new offerings to customer bases across the globe.

Any financial institution engaged in mortgage lending has a responsibility to make sure its employees are aware of the current status of lending discrimination laws. The Office of Fair Housing and Equal Opportunity (FHEO) office of HUD has established a set of guidelines to help lenders understand fair lending and the law that governs it, how fair housing rights are protected under the federal Fair Housing Act, and how to spot signs of a violation.

As is always the case, July brings the distraction of long-awaited summer vacations. This year in particular, there has been much talk about how (or if) Congress will balance summer recess and their pressing responsibilities related to changing legislation. Though media has zeroed in on the important Healthcare Reform bill, other topics—notably, the Financial Reform bill and its keystone Community Reinvestment Act (CRA)—also are demanding attention from Congressional agendas. 

At the start of 2017, analysts around the world vocalized their expectations about the opportunities and complexities that would impact the C-suite in general and CFOs in particular. With a new president in the U.S., Brexit in the European Union, cyber attacks in almost every major market and industry, and continuing acceleration in financial technology innovation, CFOs have had plenty of complex, micro- and macroeconomic impacts to address.

At the start of 2017, we looked at the topics that were of the greatest interest to you in 2016. Issues related to regulatory changes, cyber issues, demographic shifts, and new banking channels and roles for community banks captured our attention—and yours. Not surprisingly, our most popular blogs of 2016 were related to technology risk and complexity, global markets, and regulatory complexity. 

As banks evolve, so should your leadership team and board. Shareholders, analysts, investors, and even customers want proof of diversity, collaboration, and confident decisions. No longer can a bank board be a ‘good old boys club’ comprised of leaders from the local business community. Effective leadership reflects the composition of the customer base, it encourages objectivity, and it brings a broader set of collective skills to bear.

Banks already engaged in the CECL implementation process know that it poses significant compliance and operational challenges to the allowance for loan losses calculation – the largest and most critical estimate for banks. But there’s another side to this coin. CECL also is a unique and compelling opportunity for banks to build the capacity to gather and use data to scale, create new revenue streams, and compete more successfully in a multi-channel marketplace.

On Monday, May 1^st, President Trump spoke to representatives from the Independent Community Bankers of America (ICBA), committing to cut the ‘red tape’ imposed by the 2010 Dodd-Frank financial regulatory law. His repeal promises were met with a great deal of excitement from the community bankers present, in part because of the reminder that the number of federally insured small banks dropped from 7,357 in 2011 to 5,980 in 2016—at least in part because of the regulation.[1] ICBA representatives including CEO Cam Fine reiterated the general tone, saying that community banks face a “pressing need for regulatory relief.”[2]

On Friday, May 12, a ransomware attack called WannaCry hit computers in Europe, followed by Asia and more than 150 other countries including the U.S. By Monday, the cyberattack had hit more than 300,000 computers, first locking them and then demanding a $300 payment to restore their files. While the identity of the individual or group who deployed the software (WannaCrypt) is yet unknown, it didn’t take long for copycats to pop up. That’s partly because the WannaCrypt ‘exploits’ were taken from the National Security Agency, which had reported the theft in April. About the same time, Microsoft released a patch to protect against the vulnerability. The problem was, few people took advantage of it.

As promised, the Federal Reserve’s monetary policy committee raised interest rates by a quarter of a percentage point at its March 15 meeting. Chair Janet Yellen had suggested the hike would be appropriate if economic markers—in particularly GDP rates, jobs, and consumer spending—improved over a slight slump from at the start of 2017 determined to be mostly ‘transitory.’