Commentary: Internal audits help bank boards evaluate "conduct risk" | Research: Too-big-to-fail's impact on risk appetite within banks | Fed guidance aims to refocus bank boards' risk-management duties
January 17, 2018
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Internal Audit Watch
Commentary: Internal audits help bank boards evaluate "conduct risk"
Serving on a US bank board requires a greater focus on cultural factors such as "conduct risk," and guidance from the Office of the Comptroller of the Currency calls for boards to provide a "credible challenge" to bank executives' actions, write John Carey and Kathlyn Farrell of Treliant Risk Advisors. "Should the board have concerns about areas of the bank that are not highlighted by management, commissioning either an internal audit or external review of those areas will help ensure that appropriate light is cast on potential areas of risk," they write.
Banking Exchange (1/12) 
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The Millennial Auditor - Understanding and Managing the Next Generation.
Is your department prepared with the flexibility and technology to attract and manage the next generation of auditors?
Risk Management
Research: Too-big-to-fail's impact on risk appetite within banks
Researchers explore the effect of bank size and the presumption of government bailouts on decision making, noting the large banks have an incentive to be more aggressive when they are operating with a governmental safety net.
Harvard Law School (1/8) 
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Fed guidance aims to refocus bank boards' risk-management duties
Proposed guidance from the Federal Reserve is intended to pull back on expanding governance responsibilities for bank boards since the financial crisis. A key point in the Fed proposal concerns communication among the risk committee, audit committee and compensation committees, the Deloitte Center for Financial Services says.
Banking Exchange (12/27) 
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Explore Liquidity Risk's Past, Present, and Future.
The IIA's new Practice Guide: Auditing Liquidity Risks, An Overview provides a history of liquidity risk's regulatory environment, gets financial services auditors up-to-speed on today's regulations, and discusses how it will impact supervisors' expectations related to internal audit's approach. Get it today
Regulation & Compliance
Few banks say they're ready for CECL compliance
A standard for reporting current expected credit loss takes effect in 2020, but only 11% of banks say they are ready. Sixty-seven percent of banks say they have not started implementation.
American Banker online (free content) (1/9) 
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Bitcoin keeps regulators scrambling
Bitcoin keeps regulators scrambling
Mnuchin (Alex Wong/Getty Images)
The Commodity Futures Trading Commission, the Securities and Exchange Commission and international regulators continue to scramble to determine how to handle bitcoin trading, futures contracts and exchange-traded funds. The Financial Stability Oversight Council is reviewing whether digital currencies pose systemic risk, Treasury Secretary Steven Mnuchin says.
Bloomberg Businessweek (tiered subscription model) (1/12),  The Hill (1/12),  Barron's (free content) (1/13) 
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Updated UK standard reduces entities defined as financial institutions
The UK Financial Reporting Council has revised an accounting standard to decrease the number of entities that are deemed financial institutions. The regulator said it "expects there to be an overall cost saving to preparers as a result of these changes when measured over the lifetime of their implementation, without impacting significantly on the usefulness of the resulting information for users of the financial statements."
Bloomberg BNA (subscription required) (12/18) 
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EBA releases guidance on IFRS 9 compliance
The European Banking Authority has issued final guidance for companies to report changes in regulatory capital because of implementation of International Financial Reporting Standard 9. The standard requires firms to earmark funds for expected credit losses, but banks can phase in compliance.
Politico Pro (subscription required) (1/12) 
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FSAC: Lessons Learned From the Federal Reserve Exams
Federal Reserve regulators share insights gleaned during recent examinations of large firms, including managing the three lines of defense and common internal audit challenges seen across the firms. Read more.
Fraud & Ethics
SEC reportedly cautious of cryptocurrency funds
The Securities and Exchange Commission reportedly asked several fund companies to withdraw applications for bitcoin exchange-traded funds and cryptocurrency mutual funds, surprising financial firms. The regulator is concerned about investor protection and proper valuation of funds, given cryptocurrency's price volatility, sources say.
Bloomberg (free registration) (1/11) 
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Banks support anti-money-laundering database
The financial industry stands behind a measure that would require corporations to register with the Treasury Department's Financial Crimes Enforcement Network, a rule that would help banks comply with an anti-money-laundering law that goes into effect in May. That law requires banks to identify the owners of companies they serve, a task they say the proposed Treasury database would make easier.
The Wall Street Journal (tiered subscription model) (1/9) 
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Emotional and Artificial Intelligence Experts to Keynote
Join two expert presenters. Dr. J.P. Pawliw-Fry, author, psychologist, and leadership, performance, and change expert, presents "The Brain Science of Performance: Managing Emotions in a Complex World." And, as a business futurist and technology trends expert, Patrick Schwerdtfeger delivers, "Big Data and Artificial Intelligence: Overview and Fireside Chat." Register now.
AI, data analytics expected to influence banking in 2018
Among the top tech trends that will affect banking in 2018 are artificial intelligence, data analytics and data sharing, along with investment in cybersecurity and financial technology.
American Banker online (free content) (12/28) 
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FSAC 2018 Financial Services Exchange
As the regulatory environment becomes more complex, the Financial Services Exchange is the event for internal auditors to learn how to navigate through the associated risks. Enjoy interactive sessions, informative presentations, valuable practice sharing, revealing success stories, and tangible takeaways. Oct. 1-2, 2018, Washington, D.C. Register early and save!
IIA News
Infographic: Implementation of internal audit recommendations
A recent survey of chief audit executives reveals the importance of monitoring the implementation of internal audit recommendations. CAEs in the financial-services industry provide their insights. Download the infographic.
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FSAC membership: Your New Year's resolution
The Financial Services Audit Center is the premier resource for auditors in the financial-services industry, delivering low-cost, high-quality knowledge sharing and relevant reporting on trends, benchmarking and critical content. Join now.
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The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.
George Bernard Shaw,
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About the IIA Financial Services Audit Center (FSAC)
FSAC is an IIA specialty center for audit professionals in the banking, asset management, and insurance sectors. FSAC advances the professional practice of auditing in the financial services industry through thought leadership, education and training events, professional guidance, and advocacy. Learn more about FSAC and how you can add the center to your IIA membership.
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