Financial Services Regulatory Reminders and Initiatives
It is always prudent to keep informed on the mindset of Federal Regulatory Agencies. To begin, consider these highlight points by Acting Comptroller of the Currency, Michael J. Hsu, at the Institute of International Bankers, Annual Washington Conference on March 7, 2022. Mr. Hsu also holds an ex-officio seat on the Board of Directors of the Federal Deposit Insurance Corporation.
Related to sanctions, there was a remark on awareness of the Executive Orders and the U.S. Treasury’s Office of Foreign Assets Control (OFAC) designations regarding Russia-related sanctions as to taking appropriate actions to blocking and rejecting transactions and reporting to OFAC.
Heightened vigilance related to cyber defense was discussed. The Cybersecurity and Infrastructure Security Agency (CISA) will provide information on its “Shields Up” website to promote awareness and mitigation of current cybersecurity threats. That site should be checked regularly for new cybersecurity advisories and resources. Awareness for phishing attacks is critical.
In the near term, the OCC will begin assessing large banks’ climate risk management capabilities.
For midsize and community banks, it will be years before OCC examiners conduct climate risk management examinations.
The importance of diversity and inclusion in the banking industry and broader financial services sector was discussed.
It was noted that without diverse leadership, banks and their regulators may develop “blind spots or suffer from groupthink which can threaten safety and soundness – and possibly the financial sector as a whole.”
Banks should fully reflect the communities they serve. Management candidates who can enrich an organization’s culture and bring a different perspective to bear should be viewed more favorably than those who will simply fit culturally. Inclusion means giving these management individuals a voice, inviting their input, and listening and reacting.
On March 9, 2022, President Biden signed an Executive Order instructing exploration of possible uses, regulators, and research and development of digital assets/cryptocurrencies (a U.S. Central Bank Digital Currency/CBDC). Earlier on January 13, 2022, Acting Comptroller of the Currency, Michael J. Hsu in News Release 2022, discussed regulation of Crypto assets.
In summary, current regulatory reminders and initiatives include:
1. OFAC Sanctions
2. Cyber defense
3. Climate risk management
4. Diversity and inclusion
5. Cryptocurrency regulations and research toward a potential CBDC