The banking system remains strong and sound, but it is critical for banks to ensure they are appropriately managing risks to maintain confidence in the banking system. The banking system faced increased volatility due to external liquidity concerns at the beginning of 2023. As such, banks are focused on stabilizing liquidity and maintaining confidence in the banking system.  

Banks should remain diligent and confirm the effectiveness of their risk management practices, particularly asset-liability management (ALM), ensuring they can continue to withstand current and future economic and financial challenges.  

Compliance Alliance has curated the following Toolkit to address the host of ALM and other considerations banks should be considering staving off the economic headwinds expected in 2024, including:  

  • Liquidity Risk 
  • Market Risk / Interest Rate Risk  
  • Investment strategies 
  • Credit /Asset Quality 
  • Accounting / Earnings / Allowances for Credit Losses / CECL 
  • Capital Adequacy 
  • Management/Organizational risks 

If you are not a member of Compliance Alliance and would like to access these tools or learn more about our all inclusive membership. Give us a call : 888-353-3933  or email us at [email protected]

What are expectations of regulators in the post-SVB/Signature environment? 

Whether we agree with their perspectives or not, it is important to understand the approach regulators will be taking in 2024.  We have compiled a series of links to help provide insights based on the comments and actions of the regulators themselves:

What are critical focus areas for bank assessments?

C/A Compliance Minute Videos:

  • Economic Headwinds to Prepare for in 2024 – In this Compliance Minute, Victoria Stephen highlights why it is critical for banks to ensure they are appropriately managing safety and soundness risks as we prepare to face potential economic headwinds in 2024. 
  • Asset-Liability Management in 2024  – In this Compliance Minute, Victoria Stephen warns that banks should remain diligent and ensure the strength of their risk management practices, and in particular asset-liability management (ALM), in order to best confront current and future economic and financial headwinds in 2024.
  • Overview of Interest Rate Risk in 2024 – In this Compliance Minute, Victoria Stephen provides an overview of a bank’s sensitivity to market risk, with a focus on interest rate risk since for most community banks, market risk is primarily driven by their exposure to varying interest rates.

C/A Articles:

C/A Huddles:

    • For this month’s Huddle, included a special focus on the potential economic headwinds we will be facing as we head into 2024 and discussing why it is critical for banks to ensure they are appropriately managing safety and soundness risks in anticipation.Listen Here! 

Economic Headwinds Tools:

Asset-Liability Management:

  • Asset & Liability Management (ALCO) Committee Charter
  • Assets Liability and Liquidity Management Policy
  • Brokered Deposits Policy
  • Interest Rate Risk Audit Procedures
  • Interest Rate Risk Policy
  • Key Risk Performance Ratio Dashboard
  • Loan Modification Agreement Template (Adjustable Interest Rate)
  • UBPR Capital Ratios Cheat Sheet
  • Regulation F Interbank Liabilities Policy

Allowances for Credit Losses/CECL & Credit Risk/Concentration Risk:

  • Assessments Determination After Removal of Double Counting of the Current Expected Credit Losses (CECL) Methodology from the Optional Regulatory Capital Transitions
  • Current Expected Credit Losses (CECL) Policy
  • Current Expected Credit Losses (CECL Audit Checklist
  • CECL Loan Refinancing and Restructuring Worksheet
  • CECL Loan Modification Cheat Sheet
  • Concentration of Credit Policy
  • Concentration of Credit Risk Assessment

Investment Risk:

  • Investment Policy
  • Regulation R Policy
  • Regulation R Training
  • Investment Securities Audit Worksheet

Capital Requirements:

  • Amendments to Capital Stress Testing Notice of Proposed Rulemaking Summary
  • Capital & Dividend Policy
  • Regulation F Interbank Liabilities Cheat Sheet
  • Regulation F Interbank Liabilities Procedures
  • Regulatory Capital Rule and Total Loss-Absorbing Capacity Rule: Eligible Retained Income Final Rule Summary

Asset Management:

  • Purchased and Brokered Loans Risk Assessment
  • Purchased and Brokered Loans Risk Internal Control Checklist
  • Repurchase Agreement Policy
  • Counterparty Credit Risk Management Policy (coming soon)

Fraud Mitigation:

Physical Security:

  • Bank Protection Act Policy Security Program
  • Branch Security Review Checklist
  • Physical Security Procedures
  • Physical Security Risk Assessment

Employee Compensation/Benefits:

  • Human Resources General Policy
  • MLO Compensation Guidelines Policy

Internal Controls:

  • Due from Bank Policy
  • Dividend and Inter-Company Expense Policy
  • Expense Policy
  • Fixed Asset Policy
  • Fixed Assets Audit Worksheet
  • Simplified Supervisory Formula Approach Job Aid

The Compliance Alliance team will continue to update the Economic Headwinds Toolkit to meet your needs as circumstances evolve. Please let us know your thoughts about the Toolkit and share areas of concern you would like us to address by reaching out via the contact information.