I ran across an interview recently that the FDIC's Elizabeth Khalil gave to InfoSecurity's Tracy Kitten about the FFIEC's proposed guidance on social media. Among my take-aways are the following:
- The push for the guidance came from smaller banks that wanted the regulators to give them some free advice. We all understand the fact that because small banks have less money available to pay for expensive lawyers, they look to leverage off of every free resource they can glom onto. Trade associations aren't free, but if you're paying your dues, you look to them to give you your money's worth. Since banks pay the federal bank regulators assessments, they want some bang for those bucks, as well. I get it.
- While Ms. Khalil mentioned "reputational risk" as the second major risk of the three she discussed ("compliance issues" was number one and "third party risk" was the third), I think reputational risk layers through much of the regulators' concerns. For example, misuse of consumers' personal information may be a compliance risk issue, and a Facebook vulnerability to hackers is a third-party risk. However, they both can impact the bank's reputation. Bad things that happen in a bank's social media endeavors often pose a reputational risk as an additional risk, and that's a safety and soundness concern which, in turn, is a regulatory compliance concern.
- None of what's in the guidance is new, and banks that are already engaged in social media activities should already be familiar with the elements of the guidance. If they're not, they better become familiar in a hurry and hope that no one notices.
- Due diligence on third party service providers that you intend to use is critical. The due diligence needs to be ongoing. A third party's faux pas can bite the bank in the backside as well as the third party. Monitoring is essential.
- As is the case with online banking security, the regulators encourage banks to educate consumers on social media risks. For example, the regulators will look favorably on a bank educating its social media users on the risk of fraudulent bank sites, how to recognize the real deal from the fraudster, and that they should never give up personal information over social media.
- Whether or not a bank is actively using social media to interface with current or potential customers, it needs to have a social media use policy. The bank's employees are using social media, and other people may be saying bad things about you in cyberspace. The bank should have a policy that deals with these issues.
The final guidance is expected to be out in the near future (the comment period closed March 25th), depending on the nature of the comments received.Interested bankers should keep their eyes peeled (although, don't hold your breath).
I'll be giving a breakout session on social media compliance on July 3, 2013 at CUNA’s America’s Credit Union Conference in New York City. If you're a reader and are attending that conference, say hello.