The Department of Banking and Consumer Finance Fall Filed Guide, 2020.
Department of Banking and Consumer Finance Fall Field Guide 2020
Table of Contents
Section One
The Examiner – Tips, Tools & Insight From The Field ………………………………………………. 1 - 4
Section Two
Additional Industry Resources……………………………………………………………………..………… 5 - 10
FALL 2020 RESOURCE Interim Commissioner, Rhoshunda Kelly
The Examiner Tips, Tools & Insight from the Field
TOP QUESTIONS AMONG EXAMINERS
Exam Findings-Total Banks Cited (December 31, 2019-June 30, 2020)
• What is the overall impact of Federal COVID-19 (pandemic) lending programs (PPP, Main Street, etc.)? • Is bank management appropriately identifying pandemic-related risk with respect to lending, operations, and any other affected areas of the bank? • Does management develop risk mitigating strategies to address identified pandemic risks? • Has the bank adapted to virtual operations due to employees and customers being offsite? • Is staffing adequate to cover pandemic-related absences? • Have employee absences caused issues with internal controls and ensuring the proper separation of duties? • Are appropriate back-up employees in place with respect to operations, Bank Secrecy Act, Information Technology, and any other pertinent areas? • How are Board meetings being conducted, and is the Board adequately informed of all pertinent operational issues and risks? • As unemployment and Federal consumer assistance payments end, what will be the effect on loan portfolios? • Are banks maintaining appropriate reserves to reflect pandemic impacts? • Have appraisal practices been impacted due to the pandemic, and are bankers aware of current pandemic-related appraisal guidance? TAKE-AWAYS FROM MAY 2020-COVID-19 SURVEY (Survey sent every 6 months) CREDIT QUALITY & PRACTICES • Most banks indicated no changes to the bank’s lending strategy or underwriting practices. • Banks that did make changes included tightening standards on certain industries, establishing new parameters for extensions and renewals, and limiting new business to well established customers. • Bankers viewed the following as the most affected industry or customer types:
BSA COMPLIANCE LOAN POLICY CREDIT ADMIN. LIQUIDITY MANAGEMENT STRATEGIC PLANNING SUCCESSION PLANNING WEAK EARNINGS SEPARATION OF DUTIES EXCEPTION TRACKING OTHER REAL ESTATE… POOR ASSET QUALITY ALLL METHODOLOGY
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Violations-Total Banks Cited ( December 31, 2019-June 30, 2020) AppraisalViolations
BSAViolations
FDICAppendixAtoSubpart AofPart365 MS Code of 1972 Section 81-5-1(4) MS Code of 1972 Section 91-13-6 FRBRegulationO
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MS Code of 1972 Section 81-1-91
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Hospitality
Retail
Restaurants
Banks with a Composite 3 or Worse
CRE/ rental properties Entertainment/ gaming
Oil & gas Churches
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Auto dealers
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• Past due loans for Mississippi chartered banks have remained relatively consistent over the past several years, with a slight uptick noted recently. • Almost every bank indicated no changes to LOC usage, and no unusual large draws on borrowing lines were noted. • Bankers noted little to no increase in charge-offs, and the majority of banks had not made any additional provisions to their ALLL.
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June 30, 2017 June 30, 2020
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FALL 2020 RESOURCE Interim Commissioner, Rhoshunda Kelly
The Examiner Tips, Tools & Insight from the Field
Loan Modifications for all Survey Respondents by Asset Size: # Banks Responded # of Loan Modifications
Total $ Amt. of Loan Modifications
% of Total $
Banks < $500 Million
37
2,833
$361,551,218 $196,924,821 $1,578,635,487 $7,773,160,114 $9,910,271,640
3.65% 1.99% 15.93% 78.44%
Banks $500 Million to $1 Billion Banks $1 Billion to $10 Billion
7 6 3
320
6,935 15,827 25,915
Banks > $10 Billion
TOTAL 100% ____________________________________________________________________________________________________ COVID-19 GUIDANCE INTERIM GUIDANCE ISSUED BY DBCF: • Industry Pandemic Preparedness and DBCF Response (March 13, 2020) o Sent to CEOs of state-chartered banks. o Outlined DBCF expectations for business continuity planning and offsite exam protocol. • Statement on Financial Institutions Working with Customers Affected by the Coronavirus and Regulatory Assistance (March 13, 2020) o Sent to CEOs of state-charted banks. o Outlined DBCF expectations of banks to work with customers. • Interim Regulatory Guidance – Banking Hours and Service (March 16, 2020) o Sent to CEOs of state-charted banks. o Temporarily allowed banks to modify current operating procedures and hours. o SEE: Section 81-5-97 (Hours of Business) . o SEE: Bank Regulation 1 . • Restatement of Guidance – Legal Lending Limit: Government Guaranteed Loans (April 7, 2020) o Sent to CEOs of state-chartered banks. o Provided clarity on legal lending limits related to SBA loans, including the Paycheck Protection Program (PPP). o SEE: 81-5-77(b). PROCLAMATIONS/EXECUTIVE ORDERS IMPACTING THE BANKING INDUSTRY: 53 o Declares a State of Emergency pursuant to Miss. Code Ann. 33-15-11(b)(17). o Directs state agencies and departments to utilize state resources and to do everything reasonably possible to assist communities and entities affected by the COVID-19 outbreak (Miss. Code Ann. 33-15-11(c)). o Directs that the provisions of state statutes, rules, regulations or orders may be temporarily suspended or modified if compliance with such provisions would prevent, hinder, or delay action necessary to cope with the COVID-19 outbreak (Miss. Code. Ann. 33-15-11(c)(1). • Executive Order No. 1463: March 24, 2020 (Essential Services) o Provides that “essential services” include “financial services including banks and related financial institutions, insurance, payroll, accounting, processing financial transactions, services related to financial markets….” o Supplement to order issued March 26, 2020. Clarifies authority of political subdivisions to impose restrictions regarding essential services. The following Executive Orders can be found at this link. https://governorreeves.ms.gov/covid-19/#executiveOrders • Proclamation: March 14, 2020 (State of Emergency)
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FALL 2020 RESOURCE Interim Commissioner, Rhoshunda Kelly
The Examiner Tips, Tools & Insight from the Field
• Executive Order No. 1467: April 6, 2020 (Notaries) o Temporarily modifies 1 Miss. Admin. Code Pt. 5, R. 1.5 for the duration of the State of Emergency and for 14 days thereafter and allows notaries public commissioned under the laws of this State to perform a notarization for a principal not in the physical presence of the notary public provided certain conditions are met. o Provides other temporary guidance regarding electronic signing of documents. • Executive Order No. 1469: April 9, 2020 (Annual Meetings) o Suspends the requirements of Sub-article A of Article 7 of the MS Business Corporation Act, including without limitation, Subsection (b) of Section 79-4-7.01, Subsection (c) of 79-4-7.02 and Subsections (a) and (e) of Section 79-4-7.05 of the MS Business Corporation Act, to the extent that it requires meetings of shareholders to be noticed and held at a physical location in connection with any shareholder meeting that has been scheduled or must occur before June 30, 2020. Allows for meetings to be held by electronic transmission or by electronic video screen communication. Allows for notice of such meetings by website posting and other means reasonable designed to inform all shareholders that such meeting will occur electronically. o Order remains in full force and effect with respect to any meeting duly called and convened in accordance with the MS Business Corporation Act and in reliance upon section above, notwithstanding the lapse of termination of this Executive Order No. 1469. o Authorizes and directs all departments, commissions, agencies, institutions and boards of the State of MS to cooperate in actions and measures taken in response to COVID-19 during the State of Emergency. DBCF has determined that the provisions of this order may be applied to the meeting requirements of Miss. Code Ann. 81-5-45. • Executive Order No. 1474: April 20, 2020 (Driver’s Licenses/IDs) o Suspends the expiration of driver’s licenses and ID cards set to expire between March 14, 2020 and June 30, 2020. o Such licenses and ID cards shall instead expire on August 3, 2020. • Executive Order No. 1477: April 24, 2020 (Statewide Safe-at-Home/Eviction Moratorium) o Suspends evictions in the State of MS. o Does not relieve any individual of the obligation to pay rent, to make mortgage payments, or to comply with all laws or any other obligation that an individual may have, including under tenancy or mortgage. • Executive Order No. 1484: May 14, 2020 (Eviction/Foreclosure Moratorium) o Modifies provisions of Executive Order No. 1477 regarding evictions. Suspension of evictions to sunset at 8:00 a.m. on June 1, 2020. o The expiration of this eviction provision does not affect the moratorium on residential foreclosures for borrowers with federally backed mortgage loans pursuant to Section 4024 of the CARES Act. The Federal Housing Finance Agency (FHFA) announced June 17, 2020 that Fannie Mae and Freddie Mac (the Enterprises) will extend their single-family moratorium on foreclosures and evictions until at least August 31, 2020. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. The previous federal moratorium expired on June 30 th . • Executive Order No. 1516 and 1517: August 4, 2020 (Statewide Face Covering Mandate) o Includes an exemption to the face covering requirement that specifically applies to banks. o “Face coverings are not required for the following……Persons in a building or engaged in an activity that utilizes or requires security surveillance or screening (e.g. banking or financial institutions), and only during such times when these persons are under security surveillance or screening.” • Executive Order No. 1518: August 14, 2020 (Extends Statewide Safe Return instituted in Executive Order 1492, as amended and extended by other orders including 1517) o Extends face covering mandate until 8:00 a.m. on Monday, August 31, 2020. o Executive Order 1517 was originally set to expire at 8:00 a.m. on Monday, August 17, 2020.
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FALL 2020 RESOURCE Interim Commissioner, Rhoshunda Kelly
The Examiner Tips, Tools & Insight from the Field
INTERAGENCY GUIDANCE: Additional resources and links to COVID related guidance for bankers can be found below. https://www.fdic.gov/coronavirus/bankers/
CONFERENCE OF STATE BANK SUPERVISORS (CSBS): Additional CSBS resources can here found below. https://www.csbs.org/
AGENCY CONTACTS: Rhoshunda Kelly, Interim Commissioner rhoshunda.kelly@dbcf.ms.gov (601) 321-6906 Sam Hubbard, Director, Banking Division sam.hubbard@dbcf.ms.gov (601) 321-6908
PerryAnne Thimmes, Supervisor of Examinations perryanne.thimmes@dbcf.ms.gov (601) 321-6909 Erik Smith, Supervisory Review Examiner erik.smith@dbcf.ms.gov (601) 321-6910
Bridgette Wiggins, General Counsel bridgette.wiggins@dbcf.ms.gov (601) 321-6924
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DBCF INDUSTRY RESOURCES COMMON LAWS & REGULATIONS
MISSISSIPPI CODE OF 1972, ANNOTATED OVERDRAFTS
• 81-1-91 – Overdrafts http://law.justia.com/codes/mississippi/2010/title-81/1/81-1-91/
• 81-5-1(4) – Prohibits overdrafts to State, County & Municipal governments http://law.justia.com/codes/mississippi/2010/title-81/5/81-5-1/
DORMANT ACCOUNTS
• 89-12-5 – Presumed abandonment of property held or owning by bank or other business association (dormant accounts) http://law.justia.com/codes/mississippi/2010/title-89/12/89-12-5/ • 89-12-17 – Additional conditions for presumption of abandonment of intangible personal property http://law.justia.com/codes/mississippi/2010/title-89/12/89-12-17/ • 89-12-19 – Additional conditions for presumption of abandonment of sum payable on money order, traveler’s check and the like http://law.justia.com/codes/mississippi/2010/title-89/12/89-12-19/
• 89-12-23 – Report abandoned property to State Treasurer http://law.justia.com/codes/mississippi/2010/title-89/12/89-12-23/ • 89-12-29 – Deliver abandoned property to State Treasurer http://law.justia.com/codes/mississippi/2010/title-89/12/89-12-29/
LOANS
• 75-17-9 – Applying partial payments http://law.justia.com/codes/mississippi/2010/title-75/17/75-17-9/ • 81-5-51 – Loan Limits to directors and executive officers http://law.justia.com/codes/mississippi/2010/title-81/5/81-5-51/ • 81-5-77 – Limit of loans to single borrower http://law.justia.com/codes/mississippi/2010/title-81/5/81-5-77/ BANK MANAGEMENT
• 81-3-7 – Articles of Incorporation (includes designation of President and Cashier) http://law.justia.com/codes/mississippi/2010/title-81/3/81-3-7/
• 81-3-9 – Number of bank directors required
5
http://law.justia.com/codes/mississippi/2010/title-81/3/81-3-9/
• 81-5-45 – Qualification of directors/ Executive & Audit must meet 2 times http://law.justia.com/codes/mississippi/2010/title-81/5/81-5-45/
GENERAL BANKING
• 81-5-57 – Excess Deposits (includes Deposit x Capital Ratio) http://law.justia.com/codes/mississippi/2010/title-81/5/81-5-57/ • 81-5-87 – Holding of real estate by bank (Other Real Estate) http://law.justia.com/codes/mississippi/2010/title-81/5/81-5-87/
FDIC RULES AND REGULATIONS
• Part 323 – Appraisals https://www.fdic.gov/regulations/laws/rules/2000-4300.html
• Part 337 – Unsafe & Unsound Banking Practices Standby Letters of Credit Limits on extensions of credit to executive officers, directors, shareholders Brokered Deposits https://fdic.gov/regulations/laws/rules/2000-5900.html
• Part 353 – Suspicious Activity Reports https://fdic.gov/regulations/laws/rules/2000-7500.html
• Part 364 – Standards for Safety and Soundness Appendix A to Part 364 – Interagency Guidelines Establishing Standards for Safety and Soundness https://fdic.gov/regulations/laws/rules/2000-8600.html
• Part 365 – Real Estate Lending Standards https://fdic.gov/regulations/laws/rules/2000-8700.html
• 363 Part 5 law on audit in general https://www.law.cornell.edu/cfr/text/12/363.5 https://www.law.cornell.edu/cfr/text/12/363.5 https://www.fdic.gov/regulations/laws/rules/5000-3250.html https://www.fdic.gov/regulations/safety/manual/section4-2.pdf
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FDIC RULES AND REGULATIONS – AT A GLANCE
At-a-Glance Part 323.pdf
At-a-Glance Part 337.pdf
At-a-Glance Part 353.pdf
At-a-Glance Part 365.pdf
FEDERAL RESERVE
• Reg O – Part 215: Loans to Executive Officers, Directors and Principal Shareholders http://www.ecfr.gov/cgi-bin/text- idx?c=ecfr&sid=635f26c4af3e2fe4327fd25ef4cb5638&tpl=/ecfrbrowse/Title12/12cfr215_main_02.tp l • Section 23A – Relations with Affiliates & Section 23B – Restrictions on Transactions with Affiliates http://www.ecfr.gov/cgi-bin/text- idx?c=ecfr&sid=635f26c4af3e2fe4327fd25ef4cb5638&tpl=/ecfrbrowse/Title12/12cfr223_main_02.tp l
FEDERAL RESERVE – AT A GLANCE
At-a-Glance Reg O.pdf
At-a-Glance Section 23A.pdf
At-a-Glance Section 23B.pdf
IT & CYBERSECURITY
EXAM RESOURCES
https://ithandbook.ffiec.gov/ Guidance for IT exams, links to regulations and laws are located here.
https://www.ffiec.gov/cybersecurity.htm Resources that can help management and directors of financial institutions understand supervisory expectations, increase awareness of cybersecurity risks, and assess and mitigate the risks facing their institutions. https://www.federalreserve.gov/supervisionreg/topics/information-technology-guidance.htm This site primarily contains guidance on Information Technology (IT) examination activities including aspects of operational risk management, which arises from the potential that inadequate information systems, operational problems, breaches in internal controls, fraud, or unforeseen catastrophes will result in unexpected losses.
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https://www.fdic.gov/regulations/resources/cybersecurity/ Federal Deposit Insurance Corporation (FDIC) cyber resources links
Information & Cybersecurity Resources
https://www.nist.gov/cyberframework This voluntary framework consists of standards, guidelines, and best practices to manage cybersecurity-related risk. The Cybersecurity Framework’s prioritized, flexible, and cost-effective approach helps to promote the protection and resilience of critical infrastructure and other sectors important to the economy and national security. https://www.csbs.org/electronic-crimes Extensive Best Practices for reducing the risks of these Corporate Account Takeover thefts have been developed by a task force of bankers while working with the US Secret Service’s Dallas Electronic Crimes Task Force office and the Texas Department of Banking. These “industry developed” Best Practices have been in use in Texas since January 2012, where they have been extremely well received and welcomed by the banking industry, and where they have already helped prevent millions of dollars of losses. https://www.isaca.org/pages/default.aspx As an independent, nonprofit, global association, ISACA engages in the development, adoption and use of globally accepted, industry-leading knowledge and practices for information systems. Previously known as the Information Systems Audit and Control Association, ISACA now goes by its acronym only, to reflect the broad range of IT governance professionals it serves. https://www.sans.org The SANS Institute was established in 1989 as a cooperative research and education organization. Its programs now reach more than 165,000 security professionals around the world. https://www.isc2.org/ (ISC)² is an international, nonprofit membership association for information security leaders. They empower professionals who touch every aspect of information security. General Cyber Awareness https://www.iamcybersafe.org/ The Center for Cyber Safety and Education (Center) is a non-profit charitable trust committed to ensuring people across the globe have a positive and safe experience online through educational programs, scholarships, and research. http://www.homelandsecurity.ms.gov/Pages/cyber.aspx The Mississippi Office of Homeland Security (MOHS) recognizes how important the Internet is to the citizens of the State of Mississippi and established this website to provide the public with online links and resources to assist with cyber security awareness.
https://www.dhs.gov/topic/cybersecurity Department of Homeland Security cybersecurity resources.
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https://www.dhs.gov/national-cyber-security-awareness-month National Cyber Security Awareness Month (NCSAM) is designed to engage and educate public and private sector partners through events and initiatives to raise awareness about the importance of cybersecurity, provide them with tools and resources needed to stay safe online, and increase the resiliency of the Nation in the event of a cyber incident. https://www.csbs.org/sites/default/files/cybersecurity101_2019_final_with_links.pdf CSBS has published a non-technical, easy-to-read resource guide on cybersecurity that bank CEOs and senior executives may use to help mitigate cybersecurity threats at their banks. The guide puts into one place industry recognized standards for cybersecurity and best practices currently used within the financial services industry. The information provided within this guide is tailored to furnish CEOs with the necessary tools to better understand the threats your institution faces and how to prepare for them. It also provides questions to ask staff to ensure they are proactive in identifying and addressing cybersecurity risks.
Business Continuity/Disaster Recovery Planning
https://www.ready.gov/business Ready is a National public service campaign designed to educate and empower the American people to prepare for, respond to and mitigate emergencies, including natural and man-made disasters. The goal of the campaign is to promote preparedness through public involvement.
https://emergency.cdc.gov/ Training, tools, and resources to prepare for and respond for emergencies.
https://www.fdic.gov/regulations/resources/director/technical/cyber/cyber.html The FDIC created Cyber Challenge: A Community Bank Cyber Exercise to encourage community financial institutions to discuss operational risk issues and the potential impact of information technology disruptions on common banking functions. Information Sharing https://www.infragard.org/ InfraGard is a partnership between the FBI and members of the private sector. The InfraGard program provides a vehicle for seamless public-private collaboration with government that expedites the timely exchange of information and promotes mutual learning opportunities relevant to the protection of critical Infrastructure. https://www.fsisac.com/ FS-ISAC, or the Financial Services Information Sharing and Analysis Center, is the global financial industry's go to resource for cyber and physical threat intelligence analysis and sharing. FS-ISAC is unique in that it was created by and for members and operates as a member-owned nonprofit entity. https://www.cisecurity.org/about-us/ The CIS Controls™ and CIS Benchmarks™ are the global standard and recognized best practices for securing IT systems and data against the most pervasive attacks. These proven guidelines are continuously refined and verified by a volunteer, global community of experienced IT professionals. https://www.us-cert.gov/ The National Cybersecurity and Communications Integration Center’s (NCCIC) mission is to reduce the risk of systemic cybersecurity and communications challenges in our role as the Nation’s flagship cyber defense,
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incident response, and operational integration center. Since 2009, NCCIC has served as a national hub for cyber and communications information, technical expertise, and operational integration, and by operating our 24/7 situational awareness, analysis, and incident response center. https://isc.sans.edu/ The Internet Storm Center (ISC) provides a free analysis and warning service to thousands of Internet users and organizations and is actively working with Internet Service Providers to fight back against the most malicious attackers.
Training
https://fedvte.usalearning.gov/ The Federal Virtual Training Environment (FedVTE) provides free online cybersecurity training to U.S. government employees, Federal contractors, and veterans. Use your official government (.gov, .mil, or .fed.us) email address. If you are a government contractor or State, local, tribal, or territorial government employee who does not have a .gov, .mil, or .fed.us email address, use the email address you use for official government business. Once the system recognizes that you are not using a pre-approved government email address, you will be prompted with further instructions. If you are a government employee or member of the military, please use your .gov/.mil email address to register.
The Mississippi Department of Banking and Consumer Finance (DBCF) is not responsible for the content of any off-site web pages that are referenced by, or that reference, this document. The DBCF is not responsible for any defamatory, offensive, misleading, or illegal conduct of other users, links, or third parties. The risk of injury from the foregoing rests entirely with the user. Links from this document to other sites do not constitute an endorsement by the DBCF. The links are for convenience only. It is the responsibility of the user to evaluate the content and usefulness of information obtained from other sites. While the DBCF believes the information is reliable, human or mechanical error remains a possibility. Therefore, the DBCF does not guarantee the accuracy, completeness, timeliness, or correct sequencing of information. Reference to any specific commercial products, processes, or services by trade name, trademark, manufacturer, or otherwise does not constitute or imply endorsement, recommendation, or favoring by DBCF.
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