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Op-Ed: Banks Pay Price for Retailers' Data Breaches

ICBA NewsWatch Today 02/12/2014

SecurityOp-Ed: Banks Pay Price for Retailers' Data BreachesBanks are taking action to protect the tens of millions of consumers whose personal financial information was compromised by the massive assault on retailers, ICBA President and CEO Cam Fine and Consumer Bankers Association President and CEO Richard Hunt wrote in a new op-ed. On The Hill’s Congress Blog, Fine and Hunt wrote that the recent security breaches have a significant impact on banks, with the cost of reissuing payment cards reaching up to $15 per card. That is why banks believe that parties suffering a data breach should bear responsibility for fraud losses and why there should be a single national standard to replace the patchwork of state laws on data breaches, they wrote. In a separate article in American Banker, ICBA Vice President of Payments and Technology Policy L. Cary Whaley said that while the data breaches have increased focus on the payment system, payments-related issues were already hot topics in Washington. ICBA has been meeting and communicating with policymakers and the national media on the impact of recent retailer data breaches on community banks and the need for a stronger payments system. The association also continues offering data-security resources for community banks and their customers on the association’s online security breach toolkit. Read the Op-Ed. Access ICBA Toolkit.SecurityICBA, Coalition: Retailers Pointing Fingers, Not Taking ResponsibilityIn related news, ICBA and a coalition of other financial services trade groups said the National Retail Federation continues to point fingers rather than accept responsibility following the recent retailer data breaches. In a joint statement following an NRF media briefing, ICBA and the coalition said that the breaches at Target and other retailers had little to do with card technology and everything to do with failed computer security at major retailers. While chip-based technology should be part of the data-security discussion, it’s not the whole solution, the coalition said. “Protecting consumer data is a shared responsibility, and merchants must have the same tough data security as banks to thwart hackers,” the coalition said. ICBA has been communicating frequently with Congress on the impact of recent retailer data breaches on community banks and the need for a stronger payments system. In meetings, committee hearing statements and letters to lawmakers, ICBA has advocated that:

  • the costs of data breaches should ultimately be borne by the party at fault for the breach,
  • all participants in the payments system—including merchants—should be subject to Gramm-Leach-Bliley Act–like standards,
  • a national data-security breach and notification standard should be enacted to replace the current patchwork of state laws, and
  • unnecessary barriers to effective threat-information sharing between law enforcement and the financial and retail sectors should be removed.

More information on ICBA’s efforts and data-security resources for community banks and their customers are available on ICBA’s online security breach toolkit.AdvocacyICBA Urging Community Bankers to Send Letters Against Costly Accounting ProposalICBA is calling on community bankers to send in custom comment letters opposing proposed accounting standards that would require all community banks to revise how they account for their loan-loss reserves (ALLL), loans and securities. The Financial Accounting Standards Board proposal would implement a single approach for recognizing credit losses on loans, securities and trade receivables. The proposal would use an “expected loss” model, which would require banks to estimate expected credit losses and recognize the net present value of those losses at origination. It would replace the “incurred loss” model. FASB’s proposal would require complex modeling and compel banks to recognize losses much earlier than necessary in the credit-loss cycle, penalizing community banks for investing in loans and securities. The Office of the Comptroller of the Currency estimates that loan-loss reserves on average will increase by 30 percent to 50 percent with adoption of the proposal. ICBA’s customizable letter urges FASB to re-propose a simpler and more straightforward proposal that would not harm the nation’s community banks. Send in Your Letter Today! Read More on the Issue. Flood InsuranceHouse Debates ICBA-Advocated Flood Insurance BillThe House continues to debate ICBA-advocated legislation to protect homeowners from significant increases in flood insurance premiums. The House debate follows a recent Senate vote approving S. 1926, which is designed to mitigate sharp National Flood Insurance Program premium increases. S. 1926, introduced by Sens. Robert Menendez (D-N.J.) and Johnny Isakson (R-Ga.), would delay steep rate increases for up to four years by giving the Federal Emergency Management Agency time to develop a plan to help property owners who cannot afford higher premiums. These increases would negatively affect home values and destabilize the still-recovering housing market in affected areas. The House is debating whether to advance legislation similar to the Senate bill or take up an alternative plan to address the dramatic flood insurance premium increases. ICBA worked closely with the Senate and continues working with the House to mitigate these dramatic rate increases and implement a comprehensive fix. Separately, the Federal Emergency Management Agency recently halted planning and development activities under one section of the Biggert-Waters Flood Insurance Modernization and Reform Act of 2012. The law prohibits FEMA from administering the premium increases that result from remapping. All other National Flood Insurance Program insurance and activities as required by Biggert-Waters Act will continue in the normal course of business, FEMA said. FEMA is barred by the Consolidated Appropriations Act of 2014 from using Fiscal 2014 funds to administer one section of the Biggert-Waters Act. The agency said it expects an additional 12 to 18 months would be required to implement the planning and development activities once Congress has restored funding. FEMA said it will continue to map flood risks and phase out subsidies for certain other policyholders under the NFIP.ICBA NewsWatch Today is sponsored by QwickRate:Need to replace deposits without repricing your base? Post rates on QwickRate. Consistently. Attract a steady stream of institutional, non-brokered deposits – no transaction fees! Schedule a personalized webinar tour (introducing our beneficial new Bank Performance Report Card tool) to learn more or register for webinar on February 11, 2pm ET or February 12, 11am ET.Federal ReserveYellen: Fed Plans Further Stimulus Cuts if Recovery ContinuesThe Federal Reserve’s asset purchases are not on a preset course and remain contingent on the Federal Open Market Committee’s outlook for the labor market and inflation, Federal Reserve Chair Janet Yellen told Congress. Testifying for the first time as Fed chief, Yellen told the House Financial Services Committee that if incoming information supports the FOMC’s expectation of continued improvement in labor market conditions and inflation, it will likely reduce the pace of asset purchases at future meetings. In the Fed’s semiannual report to Congress, Yellen said the economic recovery gained greater traction in the second half of 2013. Gross domestic product rose an estimated 3.5 percent in the third and fourth quarters, up from a 1.75 percent pace in the first half of the year, she said. Yellen is scheduled to appear before the Senate Banking Committee on Thursday. EconomySmall-Business Confidence Improves in JanuarySmall-business optimism edged up in January as owners were more positive about their sales and hiring, according to the National Federation of Independent Business’ latest index. The index rose from 93.9 to 94.1, though owners reported that they continue to find inventories too high, and sales and earnings trends continued to deteriorate.EconomyWholesale Inventories Rise in DecemberWholesale inventories rose a seasonally adjusted 0.3 percent in December, according to the Commerce Department. Total inventories were up 4 percent from a year ago, and the November increase was not revised from a 0.5 percent advance. Inventories of durable goods were up 1.3 percent from last month and 5.7 percent from last year.SBAHearing on SBA Nominee and ICBA Community Banker TodayICBA-member community banker Maria Contreras-Sweet is scheduled to appear before the Senate Small Business Committee today for a hearing on her nomination to head the Small Business Administration. Contreras-Sweet is the founder and chairman of ProAmérica Bank, a community bank in Los Angeles. The hearing is slated for 10:30 a.m. (Eastern time) today.PollTake This Week’s Quick PollTake this week’s Quick Poll on a proposal that the U.S. Postal Service enter the financial services industry, and view results from the previous poll on financial literacy. View the Archive.EducationICBA Offers Audit Certificate ProgramThe ICBA Auditing Certificate Program provides current and prospective internal auditors with an in-depth look at topic critical to the audit function at community banks. This program is made up of seven core modules based on content from ICBA’s popular Auditing Institute. Learn More.

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