Western Banker - July/August 2016 - (Page 21)

Regulatory Hot Topics An Interview with Teresa M. Curran, Senior Vice President and Division Director, Financial Institution Supervision and Credit, Federal Reserve Bank of San Francisco. WIB: In your opinion, what are the top 3 regulatory hot topics for 2016? TMC: In my remarks at the annual conference, I addressed three important topics that have been on my mind lately: tailoring supervision for smaller banks, financial technology innovations, and risk culture.1 As I said, I believe these are important topics for continued dialogue between bankers and supervisors and welcome your thoughts. I won't revisit those topics here; instead, I'll highlight some of the other hot topics drawing particular attention in the 12th District. At the top of the list is BSA compliance. While most banks in the District have satisfactory BSA compliance programs, several district banks either have unsatisfactory programs or notable compliance gaps that require attention. BSA compliance program deficiencies are one of the more frequently cited issues emerging from our examinations over the last few years. The specific compliance program weaknesses vary, but one common root cause is this: the bank's BSA compliance program simply did not keep pace with changes in the institution's risk profile. Next is cybersecurity. We know that this is a top issue as well for many bank management teams and that they devote a lot of attention and resources to making sure their systems, data, and other important information are kept secure from the ever-increasing cyber threat. Unfortunately, in today's environment, financial institutions will continue to be the target of attacks, and these attacks are getting more sophisticated. This presents significant challenges for financial institutions, particularly smaller institutions that may not have the expertise or resources to effectively identify, manage, and mitigate the risk. Third, now that we are entering a rising rate environment, we are closely monitoring the behavior of non-maturity deposits in the District. In recent years, we've seen a run-up in non-maturity deposits, and history shows us that as rates rise, these non-maturity deposits tend to decline. We don't know to what extent these deposits will migrate out of the banks or into other, higher-cost deposit categories. However, if the migration is more significant than anticipated, the rising rate environment may present challenges for bank management teams. WIB: Do you see any particular area where we might see increased emerging risk? TMC: As I highlighted at the conference, I think financial technology (fintech) has the potential to impact banks of all sizes. Fintech evolution is capturing a lot of attention at the Federal Reserve Bank of San Francisco, as well as at the other regulatory agencies in this country and abroad. We're seeing a significant increase in the number of non-depository institutions that offer continued on page 22 Western Banker July/August 2016 21

Table of Contents for the Digital Edition of Western Banker - July/August 2016

A Message from the President & CEO
From Front-End Ratings to Ongoing Risk Analysis to Rating Migration
The Fifth Pillar: Continuing Expansion of KYC
Turning Compliance Overhead Into a Competitive Advantage
Getting Started With Third-Party Risk Management: Two Key Questions
Four Steps to Winning the Vendor Management Battle
Douglass M. Eberhardt, WIB Community Banker of the Year
Regulatory Hot Topics
Professional Development
Welcome New Members
Product and Services Directory
Index of Advertisers

Western Banker - July/August 2016

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