March 6, 2020

Recommended Employer Response To Coronavirus Outbreak

By now, employers are aware of the coronavirus (officially named COVID-19) and its growing impact on the global supply chain. As the first untraced case of the coronavirus in the United States came to light, employers are increasingly faced with a related concern — how the virus may impact the workforce and what employers should be doing right now. MBA associate member Stinson offers recommendations for employers to consider in response to a coronavirus outbreak.

Fed Announces Emergency Rate Cut Amid Coronavirus Fears

Acknowledging the “evolving risks” that the coronavirus outbreak poses to the U.S. economy, the Federal Open Market Committee unanimously voted Tuesday to cut the target range for the federal funds rate by 50 basis points to a range of 1% to 1.25%. This is the first emergency rate cut the FOMC has made since 2008.
 
The committee said it would closely monitor the situation as it develops and “will use its tools and act as appropriate to support the economy” in the days ahead. In a press conference, Federal Reserve Chairman Jerome Powell emphasized that the underlying fundamentals of the economy remain strong. 

“Financial markets are functioning in an orderly manner,” he said, adding that “supervisors will be working with banks to ensure that they work with their borrowers” that may be struggling as a result of the outbreak.
 
While “the situation remains a fluid one,” Powell emphasized that “the U.S. economy is strong and we will get to the other side of this. I fully expect that we’ll return to solid growth and a solid labor market.”

Financial Regulators Issue CECL Policy Statement

As banks work to implement the current expected credit loss accounting standard, the financial regulatory agencies have finalized an interagency policy statement on allowances for credit losses. The policy statement describes the CECL methodology for determining allowances for credit losses applicable to financial assets measured at amortized costs, including loans held-for-investment, net investments in leases, held-to-maturity debt securities and certain off-balance-sheet credit exposures.

In response to comments from industry stakeholders, the agencies made several changes to the final policy statement, including those addressing qualitative factor adjustments for debt securities, the use of accounting policy elections related to accrued interest receivable and auditor independence. The agencies also noted that the Federal Financial Institutions Examination Council will consider whether to modify the instructions for the Call Report regarding the reporting of expected credit losses on off-balance sheet exposures to be consistent with U.S. GAAP reporting requirements after commenters raised concerns over the current inconsistency.

OCC Issues FAQs On Third-Party Risk Management

The Office of the Comptroller of the Currency clarified its expectations for banks’ management of relationships with third-party providers, including fintech firms, cloud services providers and data aggregators. The agency published a set of FAQs intended to supplement 2013 guidance on third-party risk management and reflect evolving industry trends.
 
With respect to data aggregation, the FAQs establish that banks that have business arrangements with data aggregators should conduct due diligence and ongoing monitoring commensurate with the risk these providers pose to the bank. The OCC noted that determining whether a bank has a business relationship with a data aggregator “depends on the level of formality of any arrangements that the bank has with the data aggregator for sharing customer-permissioned data.”
 
However, the guidance also noted that even in instances where banks are not receiving a direct service from a data aggregator and there is no business arrangement, there is still risk that should be managed. For example, the agency noted that banks should be engaging in risk management activities around screen-scraping activities, which typically involve customers sharing their bank login credentials with data aggregators.
 
“[B]ank management should perform due diligence to evaluate the business experience and reputation of the data aggregator to gain assurance that the data aggregator maintains controls to safeguard sensitive customer data,” the OCC said.

Data Bank Post Highlights Trends In Bank M&A

A new ABA Data Bank article examines trends in community and midsize bank M&A, including the relative asset sizes of M&A target banks. An American Bankers Association analysis of S&P Global data shows that banks with under $250 million in assets accounted for 55% of M&A targets in 2019, down from 75% in 2005. 

The article examines survey data and expert predictions that M&A may decline in 2020 because of high valuations and a scarcity of suitable acquirees. The article also reviewed survey research about the factors driving bank executives to consider buying or selling.

ABA Foundation, FTC Release New Infographic On Money Mule Scams 

A new infographic from the American Bankers Association Foundation and the Federal Trade Commission highlights “money mule” scams — a type of scam in which criminals use their victims to move stolen funds. Money mule scams can take many forms and commonly involve online dating, work-at-home jobs or prizes.

In a typical scam, the fraudster sends the victim money to deposit into a bank account and then asks them to send some of it to someone else, usually through a gift card or a wire transfer. When the initial check is later found to be fake, victims are on the hook for the full amount.

As the infographic notes, consumers can avoid money mule scams by never using their own bank accounts or opening a new account in their name to transfer money for an employer; never paying to collect a prize or move any money out of their “winnings”; and never sending money to an online love interest. If a money mule scam is suspected, consumers should break off contact with the scammer, inform their bank and report the incident to the FTC.

DOJ Charges Record Number Of Elder Fraud Cases

The U.S. Department of Justice has charged more than 400 defendants responsible for more than $1 billion in losses this year in the largest coordinated sweep of elder fraud cases in history, Attorney General William Barr and Chief Postal Inspector Gary Barksdale announced Tuesday. That figure reflected a 54% increase in the number of individuals charged over last year.
 
Barr noted that the effort reflects a renewed focus on prosecuting elder fraud cases by the DOJ, which has expanded its enforcement efforts. 

“As we have worked closely with banks and other private-sector partners in this effort, it has become clear that a substantial part of the fraud against elders is conducted by transnational criminal organizations,” he said. “For this reason, we have now expanded our enforcement efforts to have global reach.”
 
The DOJ also announced the creation of a new national hotline that will provide services to seniors that may be victims of financial exploitation. Victims will receive assistance with reporting suspected fraud to relevant agencies and will receive resources and referrals to other appropriate services as needed. When applicable, case managers will complete a complaint form with the FBI’s Internet Crime Complaint Center and/or the Federal Trade Commission.