May 24, 2017


 
Contents:
Treasury Secretary Discusses Regulatory Changes at Senate Banking Committee Hearing
CFPB: MOST HIGH-RISK STUDENT LOAN BORROWERS NOT PART OF AFFORDABLE REPAYMENT PLANS
E-Signature Provider Reports Malware Incident
President Signs Cybersecurity Executive Order
A 3-stage approach to CECL compliance by 2020-21



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One of the Treasury Department's priorities will be tailoring regulations for community banks, explained Treasury Secretary Steve Mnuchin during his Thursday testimony before the Senate Banking Committee .

"Our initial report will contain recommendations to provide relief for community banks and make regulations more efficient, effective and appropriately tailored," said Mnuchin, referencing a report on how the current regulatory system meets a set of core principles as outlined by the White House .

Mnuchin also outlined several other early priorities of the Treasury Department, including enacting tax reform, combatting terrorist financing, and housing finance reform. In regards to regulatory reform, Mnuchin signaled interest in revisiting the $50 billion bank threshold for systemically important institutions, and increasing transparency of the Financial Stability Oversight Council.
Earlier this month, the CFPB released a student loan data analysis stating 9 in 10 of highest-risk borrowers were not enrolled in federal affordable repayment plans. Additionally, the study also showed of the 9 in 10 not enrolled, nearly half re-defaulted, compared to less than 10 percent of those who were enrolled.

"For far too many student loan borrowers, the dream of a fresh start turns into a nightmare of default and deeper debt," said CFPB Student Loan Ombudsman Seth Frotman.

The student loan market has grown rapidly in the last decade with about 44 million Americans now owing money. The combined total for outstanding federal and private student loan debt now exceeds $1.4 trillion, with the vast majority from federal loans. The U.S. Department of Education estimates more than 8 million federal student loan borrowers have gone at least 12 months without making a required monthly payment and have fallen into default. Nearly 1.2 million borrowers defaulted in the past year. These borrowers face negative consequences such as wage garnishment, loss of federal benefits, and negative credit history.
DocuSign, a provider of electronic signature technology, reported a campaign of malicious phishing attacks targeting its customers.

The company said the emails spoofed the DocuSign brand to trick recipients into opening an attached Word document that, when clicked, installs malicious software.

DocuSign said a malicious third party had gained temporary access to a non-core system used for service-related announcements, with stolen data limited to customer and user email addresses.

The company's core e-signature service, envelopes and customer documents remain secure, it said.

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President Donald Trump signed an executive order to strengthen the cybersecurity of federal network and critical infrastructure.

Among its directives, the order charges the federal government with assessing existing capabilities that may be available to help critical infrastructure in their cybersecurity efforts.

These entities include large financial services companies, energy companies and other businesses that, if disrupted, could cause economic, health or national security concerns.
A 3-stage approach to CECL compliance by 2020-21                    
by Keith Monson, CSI   

The Financial Accounting Standards Board's (FASB) Current Expected Credit Loss (CECL) approach to the Allowance for Loan and Lease Losses (ALLL) takes effect in 2020 and 2021. CECL will fundamentally change the way financial institutions account for loan loss reserves.

Industry leaders have urged increased awareness of the CECL guidelines in order to minimize its impact on institutions' capital. With its due date not long away, every financial institution should prioritize actualizing CECL's accounting standards, sooner rather than later.

Here are 3 stages to a successful implementation strategy:

Stage 1: Initiate Education and Planning
According to the American Bankers Association (ABA), regulators consider CECL "the biggest change ever to bank accounting." With such a change comes growing pains. To minimize those pains, consider adherence to the following:
  • Find a Leader, Assemble a Team
Determine a strong candidate with ample experience in credit risk or accounting, as well as a background in project management. Your CECL leader should then build a team representing at a minimum; senior management, loans, credit underwriting, risk management, accounting and internal audit.
  • Educate from the top down
Developing an institution-wide understanding of CECL is key. Review these interagency documents about CECL: Joint Agencies Statement and Frequently Asked Questions; then take the time to explain any possible implications to your board and key stakeholders.
  • Craft a project plan
Your detailed project plan should manage system and policy changes, provide training and communication, and account for contingencies.
  • Keep your core engaged
CECL relies on historical data such as the life of loan or life of portfolio loss rates, which mainly reside within your core system. Contact your core provider to modify the current closed-file destruction schedule to ensure your access to CECL information.

Stage 2: Mapping Decision Points
The CECL project team must map out distinctive points to determine your institution's unique approach to CECL requirements.
  • Data Identification
Data collection for individual loans must be anticipated, and at a far more granular detail, including risk rating, loan duration, origination date, maturity date, loan balance, key charge-off or recovery information, and loan segmentation.
  • Collect the Data
Gather all individual loan data for existing loans to build the historical picture and/or vintage models CECL requires. This includes data from core systems, loan accounting and servicing systems, loan files, and credit memos, and all other relevant databases.


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