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Industry roundup: 19 November

New U.S. rule: Banks to report hacks within 36 hours

Federal Reserve regulators today announced the approval of final rules to improve the exchange of information on cyber attacks that could affect the U.S. banking system.

The final rule requires banks to notify key federal regulators of a serious computer security incident within 36 hours of the banking organization's determination that a cyber attack has occurred. According to the rule, the 36-hour clock starts as soon as the bank becomes aware of the incident. The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp require compliance with this regulation by May 1, 2022.

Any incidents that threaten the bank’s operations, products and services to customers or the stability of the financial institution must be disclosed immediately to regulators.

The new regulation rule also applies to companies that provide services to banks.  These organizations must provide notification to their bank clients immediately when disruptions are anticipated to affect customers for more than four hours.


How regulatory compliance affects the progress of digital transformation

Forty-eight percent of banks report that regulatory compliance has decreased digital transformation, according to the second annual Global Financial Regulations Report released by OneSpan, a global digital security solutions company. The report also shows how banks respond to new challenges posed by advanced hacker attacks, how to protect confidential data and the effect of meeting strict regulatory rules.

The survey, comprised of over 150 senior banking leaders from around the globe with assets over US$100 billion, reported that 84% of these bankers are moving forward with breakthrough innovations similar to Central Bank Digital Currency (CBDC) over the next year. Fifty percent of the banks are looking ahead to enhance and secure their mobile apps with mobile app shielding technologies in response to the innovations.

The new era of digital banking, fuelled by the pandemic, presents regulators with the near-impossible task of creating a broad and secure regulatory framework without hindering innovation, commented Steven Worth, Interim President & CEO.

Worth further explained how OneSpan’s Global Financial Regulatory Report will provide banks and financial institutions with the information they need to remain compliant and competitive.

Below are some of the conclusions from the report. 

  1. Bank’s high priority compliance challenges are:
    1. Deterring or decreasing cyber-attacks (53%)
    2. Protecting confidential information (47%)
    3. Keeping pace with changes in consumer privacy laws and industry regulations (41%)
  2. Fifty percent of banks have tapped into implementing digital remote identity verification and biometrics to comply with industry regulations. In addition, emerging technologies similar to remote online notarization (RON) are prioritized by 41% of banks.
  3. Sixty-seven percent of financial services executives agree that crypto rules make their market participation more attractive for banks.

A more comprehensive report can be found at One Span’s second annual Global Financial Regulations Report. It details the regulatory advancements country-by -country (54 jurisdictions globally) on CBDCs, open banking, artificial intelligence, digital identity frameworks, e-signatures and remote online notarization, and data privacy.


ECB Report: Pandemic risks reduced but not in the clear

The European Central Bank (ECB) released data showing a reduction in short-term pandemic-related risks to financial soundness and improving economic recovery in the countries using euro, according to the Financial Stability Survey (FSR) for November 2021. In contrast, overvaluations in some asset markets, high levels of public and private debt, and increased risks by non-banks have made them more vulnerable. Luis de Guindos, Vice President, ECB, stated that the risk of corporate defaults and bank losses are now measurably lower than six months ago.

In general, euro area companies had increased profits in the first six months of 2021, with insolvency below pre-pandemic levels. However, supply chain issues and increasing costs, including energy and inflation, create headwinds for economic recovery. Additionally, inflated real estate prices and some financial markets provide further risk. Risks in residential real estate are increasing significantly, especially in markets where home values were high before the pandemic. Investors are supporting riskier companies and business segments like crypto-assets.

Investment and pension funds have faced increasing exposure to riskier corporate debt and remain at substantial liquidity risk, while euro area banks have regained their valuation losses during the beginning of the pandemic. Although bank losses continue to be minimal, some losses might require more time to emerge. In the future, inefficiencies and overcapacity pose significant risks to euro area bank profitability.

More stringent macroprudential policies could aid in the increasing susceptibilities, particularly with regard to housing markets in some countries. According to ECB, it will also be important to strengthen the regulatory framework for the financial sector, including complete and timely execution of the Basel III reforms and a robust policy procedure for the non-bank financial sector.


Barclays’ movement toward ESG

Barclays announced a partnership with SaveMoneyCutCarbon in efforts to help business customers reduce CO2 emissions and energy costs. SaveMoneyCutCarbon is a “digital aggregator” that offers a unique marketplace that combines both effective products and expert advice.

Access to markets and tools from SaveMoneyCutCarbon will guide Barclays’ corporate banking customers on how to reduce carbon, energy, and water consumption to make their business more sustainable.

As part of Barclays' efforts to help customers move to sustainable alternatives, this partnership will allow Barclays’ corporate banking customers to book free video calls with SaveMoneyCutCarbon mentors and consider options. This includes auditing CO2 reductions to identify unused savings opportunities, end-to-end design, supply and installation of energy and water conservation projects and help with ESG reports.

The alliance stems from Barclays' 2020 investment in SaveMoneyCutCarbon, the first under the bank's £ 175 million Sustainable Impact Capital program, aimed at strategic investment in innovative green companies. Furthermore, SaveMoneyCutCarbon and Barclays’ corporate banking customers will now benefit from this partnership by building relationships consistent with Barclays’ support for the transition to a low-carbon economy.

According to Helena Sans, Head of Mid-Corporate, London & Southeast UK Corporate Banking, Barclays is committed to helping its clients move towards a more sustainable business model. Moreover, Sans commented that now is a time when businesses need this level of practical advice but also the actual ability to implement projects that save energy, water and carbon while increasing revenue and environmental performance.

SaveMoneyCutCarbon’s CEO, Matt Sait, said they are positioned to help enable the retrofit challenges faced by the UK’s domestic and commercial building stock and turbo charging companies by utilizing energy and water efficiency to meet the UK's zero-emissions target. Sait’s vision is to reduce consumption and the carbon footprint and become a brand for eco-friendly homes and organizations.

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