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Computer Security Incident Notification Requirements

The Office of the Comptroller of the Currency (OCC), Treasury; the Board of Governors of the Federal Reserve System (Board); and the Federal Deposit Insurance Corporation (FDIC) on November 23, 2021 issued a final rule that requires a banking organization to notify its primary Federal regulator of any “computer-security incident” that rises to the level of a “notification incident,” as soon as possible and no later than 36 hours after the banking organization determines that a notification incident has occurred.  The final rule also requires a bank service provider to notify each affected banking organization customer as soon as possible when the bank service provider determines that it has experienced a computer-security incident that has caused, or is reasonably likely to cause, a material service disruption or degradation for four or more hours.  The effective date of the final rule was April 4, 2022 with a compliance date of May 1, 2022.

These incidents may have many causes.  Examples include a large-scale distributed denial of service attack that disrupts customer account access for an extended period of time and a computer hacking incident that disables banking operations for an extended period of time.

This requirement will help promote early awareness of emerging threats to banking organizations and the broader financial system.  This early awareness will help the agencies react to these threats before they become systemic.

The separate service provider requirement will ensure that a banking organization receives prompt notification of a computer-security incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided by a bank service provider.  This notification will allow the banking organization to assess whether the incident has or is reasonably likely to have a material impact on the banking organization and thus trigger the banking organization’s own notification requirement.

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Given the frequency and severity of cyberattacks on the financial services industry, the agencies believe that it is important that a banking organization’s primary Federal regulator be notified as soon as possible of a significant computer-security incident that disrupts or degrades, or is reasonably likely to disrupt or degrade, the viability of the banking organization’s operations, result in customers being unable to access their deposit and other accounts, or impact the stability of the financial sector.  The final rule refers to these significant computer-security incidents as “notification incidents.” Timely notification is important as it would allow the agencies to (1) have early awareness of emerging threats to banking organizations and the broader financial system, (2) better assess the threat a notification incident poses to a banking organization and take appropriate actions to address the threat, (3) facilitate and approve requests from banking organizations for assistance through U.S. Treasury Office of Cybersecurity and Critical Infrastructure Protection (OCCIP), (4) provide information and guidance to banking organizations, and (5) conduct horizontal analyses to provide targeted guidance and adjust supervisory programs.

Notification under the Bank Secrecy Act and the Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice provide the agencies with awareness of certain computer-security incidents.  Nonetheless, these standards do not include all computer-security incidents of which the agencies, as supervisors, need to be alerted and would not always result in timely notification to the agencies.