Natural disasters show need for banks to have emergency plans | Germany's Schaeuble issues financial crisis warning | Bill ending $50B SIFI threshold approved by House panel
October 17, 2017
IIA Financial Services SmartBrief
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Internal Audit Watch
Fed focuses on enhancing banks' internal audit, controls under CCAR
The Federal Reserve continues to emphasize improvements to internal audit, governance and controls, and other processes under the Comprehensive Capital Analysis and Review framework even a decade after the 2008 financial crisis, writes Breana Patel of Bonova Advisory. Firms could better use machine learning and predictive risk models to enhance data accuracy, a key factor in internal controls and the evaluation of stress, Patel writes.
Finextra Research (10/16) 
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Auditing Culture: A Red Flag Approach
Do you have a plan on how to deal with cultural audits? Learn how to get started with this red flag approach to considering auditing culture.
Risk Management
Natural disasters show need for banks to have emergency plans
Hurricanes Harvey, Irma and Maria, along with wildfires in Northern California, have required numerous banks to execute emergency preparedness plans. Marine Bank & Trust President and CEO Bill Penney notes that some of the most important aspects of such plans are employee safety measures, flexibility and redundancy.
American Banker online (free content) (10/12) 
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Germany's Schaeuble issues financial crisis warning
Germany's Schaeuble issues financial crisis warning
Schaeuble (Sean Gallup/Getty Images)
German Finance Minister Wolfgang Schaeuble, who soon will be president of the Bundestag, is warning about the possibility of another global financial crisis. "Economists all over the world are concerned about the increased risks arising from the accumulation of more and more liquidity and the growth of public and private debt," he said.
City A.M. (London) (10/8),  Financial Times (tiered subscription model) (10/8),  Politico Pro (subscription required) (10/9) 
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A New Way to Look at Internal Audit
Through years of research and refinement, a smart and sophisticated yet simple to apply intelligence suite is now available for every internal audit function. Simply put, the Audit Intelligence Suite gives the CAE the ability to acquire valuable information and make it actionable. Get the decision support you've been looking for.
Regulation & Compliance
Bill ending $50B SIFI threshold approved by House panel
The House Financial Services Committee has passed a bill doing away with the Dodd-Frank Act provision that automatically designates any bank with $50 billion in assets as a systemically important financial institution. The bill would replace the $50 billion threshold with a requirement that regulators evaluate a bank's complexity and interconnectedness before making the designation.
St. Louis Post-Dispatch (10/12),  ABA Banking Journal online (10/12),  MLex (subscription required) (10/11) 
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Basel Committee relaxes rules on banks' derivatives exposure
The Basel Committee on Banking Supervision is giving national regulators broad flexibility in how they let banks calculate liabilities from their derivatives exposures. The change lowers the floor supervisors can allow under the net stable funding ratio to 5% from 20%.
Bank for International Settlements/News release (10/2017),  Reuters (10/6),  Financial Times (tiered subscription model) (10/6),  Politico Pro (subscription required) (10/6) 
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East African banks brace for IFRS 9
The International Financial Reporting Standard 9, which requires stronger provisioning for bad loans, is expected to significantly affect East African banks' earnings and capital levels. "We see the stock of impairments by banks growing by anything between 15[%] to 40%, in line with international estimates," said Yusuf Omari, chief financial officer of Barclays Bank of Kenya.
The East African (10/4) 
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State securities regulators focus on cybersecurity
The North American Securities Administrators Association is putting a high priority on drafting a cybersecurity rule requiring financial firms to take adequate measures to protect clients' data from hackers, said Joe Borg, the group's new president. Because the Securities and Exchange Commission and the Financial Industry Regulatory Authority haven't adopted cybersecurity rules, a model rule adopted by NASAA could end up governing the financial-advisory business.
InvestmentNews (tiered subscription model) (10/3) 
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How much value is your internal audit adding?
The intersection of internal and external audit offers opportunities for greater efficiency and effectiveness. By working closely with external auditors, internal audit can become more forward-looking and adaptive. Download the white paper to learn how.
Fraud & Ethics
Regulators grapple with cryptocurrency challenges
Regulators around the world are facing the challenge of controlling cryptocurrencies, which have seen incredible growth in recent years. Russian President Vladimir Putin raised concerns about cryptocurrencies possibly being used for tax evasion or money laundering, joining the growing list of officials calling for regulation.
Bloomberg (free registration) (10/11) 
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FSAC Knowledge Brief: Risk Data Aggregation
Internal auditors at banks of all sizes should be aware of the Basel Committee on Banking Supervision's regulation number 239 (BCBS 239) principles and prepare to provide assurance over their implementation and ongoing monitoring. This brief provides key considerations for internal audit functions of financial institutions. Download the brief.
Report shows FDIC data was targeted 54 times in 2 years
Report shows FDIC data was targeted 54 times in 2 years
(Karen Bleier/AFP/Getty Images)
The Federal Deposit Insurance Corp. experienced 54 security incidents during 2015 and 2016, according to a report from the Office of Inspector General. The report also says that the data of hundreds of thousands of consumers were potentially at risk and that the FDIC's response time to the cyberattacks was more than nine months.
ZDNet (10/6) 
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SEC forensics unit requested resources before hack discovery
The Securities and Exchange Commission's forensics unit pleaded for better equipment, training and communication two months before the SEC discovered cybercriminals had breached its corporate-information system. The unit complained of "serious deficiencies" in a three-page memo obtained by congressional staff.
Reuters (10/4) 
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FSAC Quick Poll Results: Crisis Response Procedures
Whether due to fraud, reputational damage, or natural disaster, organizations will, at some point, find themselves in "crisis mode". IIA webinar attendees from the financial services industry, 86% say they have general crisis response procedures, and 65% have crisis scenarios developed, but only about half test the scenario response. See the poll results.
IIA News
Playing in the gray: Maintaining independence
In this video, Danny Goldberg, founder of GoldSRD, discusses this delicate balance and how internal audit can stay effective as the third line of defense while assisting as a trusted adviser. Watch now.
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Facilitating audit committee leadership
In this video, Barbara Martin, principal of Expert Audit Management, explores methods for facilitating high levels of audit committee expertise, promoting ongoing education and engaging committee members in the audit process. Watch the video.
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The test of a vocation is the love of the drudgery it involves.
Logan Pearsall Smith,
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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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