By Joseph Lowe, Sageworks
Document management is a crucial task for banks, both large and small, to mitigate risks and efficiently perform daily functions.
In the effort to ensure consistent document management across the loan portfolio, it’s easy to overlook one major component: security.
According to American Bankers Association, nearly six in ten (59 percent) consumers trust banks to keep their payments safe, though in the past year data security has fallen short of consumer expectations and caught the attention of the public, with mega data breaches such as Under Armour’sbreach of 150 million records and Facebook’s CambridgeAnalytica scandal. As small and mid-tier banks continue to amass data on their users, information that is also increasingly collected through mobile devices, borrowers and account holders are weary of potential cyber threats. Financial institutions must take into account:
- What security measures are being taken to ensure data security across the loan portfolio
- How can small banks and credit unions adapt current data management processes and leverage data safety with other community banking benefits
Trust is difficult to gain yet easy to lose, especially in the financial industry, and banks are taking notice. According to IBM, U.S. organizations lost an average of $4.2 million last year due to “lost business costs”, costs associated with loss of trust by consumers. The global costs average cost of data breaches globally rose to an average of $148 per record. Large financial institutions, such as Wells Fargo, have begun utilizing “cyber ranges”, which are virtual environments replicating current systems where cyberattacks are launched to test cyber security teams’ alertness. Institutions hire a “red team” to challenge the organization and play the role as hacker. However, for local credit unions and community banks, it’s difficult to replicate such measures. Despite the priority small financial institutions place on cybersecurity, they often lack the staffing and bandwidth to test security measures against cyberattacks in an efficient manner.
Chris Thompson, senior managing director and head of financial services cybersecurity and resilience at Accenture Security said, “It’s expensive to build a cyber range or to have a sophisticated red team, and the skills needed to build those ranges are scarce. The people who run those exercises are demanding high salaries and are hard to get hold of. So there’s a danger the mid-tier banks can get left out,” in an American Banker article.
Security is an important factor to consider as most banks expand to an online branch. While security is a consideration for account holders of all ages, tech-driven millennials spend the most time using online banking and are most likely to choose financial institutions with a professional, easy-to-use online presence. As millennials’ share of the U.S. workforce – and therefore financial impact – grows, it’s important to evaluate their online security habits. Here are a few statistics to keep in mind:
- Following a breach, millennials are more likely to stop using an application or service and move to a competitor’s service
• On average, only 42 percent of millennials use passwords that meet recommended complexity standards
• Millennials are generally more aware of potential data security risks, but are more likely to trust businesses to keep their data
Millennials have been characterized as ideologically independent and often mistrusting of larger institutions. However, a Gallup report states 67 percent of millennials say they have a lot of trust in primary bank institutions, which is also the highest trust percentage among other industries. The report went on to say, “…millennials seem to rise above [data breaches], remaining trusting – and perhaps idealistic – in the face of an abundance of evidence that their online data might not be very secure.” While millennials share a high degree of trust in banks, this also means the backlash on financial institutions can be significant if that trust is broken.
In order to maintain trust from accountholders or borrowers and decrease risk of file overwrites and data breaches, banks must implement a safe storage system to manage all documentation securely.
Document libraries offer a method for banks and credit unions to securely store key documents and centralize financial data for easy access by designated users. Document libraries allow teams to collaborate in real time online and organize document collections that can sync with a financial institutions’ existing filing system. Among its many security benefits, document libraries also provide risk justification for regulators. Deloitte says that a majority of consumers are aware of the security regulations tied to banking actions, such as account opening processes, and they view it as a necessary and beneficial process to ensure consumers enjoy a hacker-free banking experience. Document libraries improve efficiency by keeping documents in one central location and satisfies account holders’ desire to join a well-regulated bank.
Storing documents within a secure system is vital to a financial institution’s success and allows for a consistent and high quality customer experience. How you manage your data becomes a key approach to both your institution’s customer relationship and growth strategy as well as your ability to mitigate risk.
Joseph Lowe is lending marketing manager at Sageworks, where he produces educational content to lead banks and credit unions in transforming their credit and lending processes to optimize for efficiency and a better borrower experience. He can be reached at [email protected]
ECB stays put but warns about surge in infections
By Balazs Koranyi and Francesco Canepa
FRANKFURT (Reuters) – The European Central Bank warned on Thursday that a new surge in COVID-19 infections poses risks to the euro zone’s recovery and reaffirmed its pledge to keep borrowing costs low to help the economy through the pandemic.
Having extended stimulus well into next year with a massive support package in December, ECB policymakers kept policy unchanged on Thursday, keen to let governments take over the task of keeping the euro zone economy afloat until normal business activity can resume.
But they warned about a new rise in infections and the ensuing restrictions to economic activity, saying they were prepared to provide even more support to the economy if needed.
“The renewed surge in coronavirus (COVID-19) infections and the restrictive and prolonged containment measures imposed in many euro area countries are disrupting economic activity,” ECB President Christine Lagarde said in her opening statement.
Fresh lockdowns, a slow start to vaccinations across the 19 countries that use the euro, and the currency’s strength will increase headwinds for exporters, challenging the ECB’s forecasts of a robust recovery starting in the second quarter.
Lagarde saluted the start of vaccinations as “an important milestone” despite “some difficulty” and said the latest data was still in line with the ECB’s forecasts.
She conceded that the strong euro, which hit a 2-1/2 year high against the dollar earlier this month, was putting a dampener on inflation and reaffirmed that the ECB would continue to monitor the exchange rate.
The euro has dropped 1% on a trade-weighted basis since the start of the year, but is up nearly 7% over the last 12 months. Against the U.S. dollar, that number rises to over 10%.
Opening the door for more stimulus if needed, Lagarde confirmed the ECB would continue buying bonds until “it judges that the coronavirus crisis phase is over”.
Lagarde also kept a closely watched reference to “downside” risks facing the euro zone economy, which has been a reliable indicator that the ECB saw policy easing as more likely than tightening.
But she signalled those risks were less acute, in part thanks to the recent Brexit deal.
“The news about the prospects for the global economy, the agreement on future EU-UK relations and the start of vaccination campaigns is encouraging,” Lagarde said. “But the ongoing pandemic and its implications for economic and financial conditions continue to be sources of downside risk.”
Lagarde conceded that the immediate future was challenging but argued that should not impact the longer term.
“Once the impact of the pandemic fades, a recovery in demand, supported by accommodative fiscal and monetary policies, will put upward pressure on inflation over the medium term,” Lagarde said.
Benign market indicators support Lagarde’s argument. Stocks are rising, interest rates are steady and government borrowing costs are trending lower, despite some political drama in Italy.
There is also around 1 trillion euros of untapped funds in the Pandemic Emergency Purchase Programme (PEPP) to back up her pledge to keep borrowing costs at record lows.
The ECB has indicated it may not even need it to use it all.
“If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full,” Lagarde said.
Recent economic history also favours the ECB. When most of the economy reopened last summer, activity rebounded more quickly than expected, indicating that firms were more resilient than had been feared.
Uncomfortably low inflation is set to remain a thorn in the ECB’s side for years to come, however, even if surging oil demand helps put upward pressure on prices in 2021.
With Thursday’s decision, the ECB’s benchmark deposit rate remained at minus 0.5% while the overall quota for bond purchases under PEPP was maintained at 1.85 trillion euros.
(Editing by Catherine Evans)
Bank of Japan lifts next year’s growth forecast, saves ammunition as virus risks linger
By Leika Kihara and Tetsushi Kajimoto
TOKYO (Reuters) – The Bank of Japan kept monetary policy steady on Thursday and upgraded its economic forecast for next fiscal year, but warned of escalating risks to the outlook as new coronavirus emergency measures threatened to derail a fragile recovery.
BOJ Governor Haruhiko Kuroda said the board also discussed the bank’s review of its policy tools due in March, though dropped few hints on what the outcome could be.
“Our review won’t focus just on addressing the side-effects of our policy. We need to make it more effective and agile,” Kuroda told a news conference.
As widely expected, the BOJ maintained its targets under yield curve control (YCC) at -0.1% for short-term interest rates and around 0% for 10-year bond yields.
In fresh quarterly projections, the BOJ upgraded next fiscal year’s growth forecast to a 3.9% expansion from a 3.6% gain seen three months ago based on hopes the government’s huge spending package will soften the blow from the pandemic.
But it offered a bleaker view on consumption, warning that services spending will remain under “strong downward pressure” due to fresh state of emergency measures taken this month.
“Japan’s economy is picking up as a trend,” the BOJ said in the report, offering a slightly more nuanced view than last month when it said growth was “picking up.”
While Kuroda reiterated the BOJ’s readiness to ramp up stimulus further, he voiced hope robust exports and expected roll-outs of vaccines will brighten prospects for a recovery.
“I don’t think the risk of Japan sliding back into deflation is high,” he said, signalling the BOJ has offered sufficient stimulus for now to ease the blow from COVID-19.
NO EXIT EYED
Many analysts had expected the BOJ to hold fire ahead of a policy review in March, which aims to make its tools sustainable as Japan braces for a prolonged battle with COVID-19.
Sources have told Reuters the BOJ will discuss ways to scale back its massive purchases of exchange-traded funds (ETF) and loosen its grip on YCC to breathe life back into markets numbed by years of heavy-handed intervention.
Kuroda said the BOJ may look at such options at the review, but stressed a decision will depend on the findings of its scrutiny into the effects and costs of YCC.
He also made clear any steps the BOJ would take will not lead to a withdrawal of stimulus.
“It’s too early to exit from our massive monetary easing programme at this point,” Kuroda said. “Western economies have been deploying monetary easing steps for a decade, and none of them are mulling an exit now.”
(Reporting by Leika Kihara and Tetsushi Kajimoto; additional reporting by Kaori Kaneko; Editing by Simon Cameron-Moore & Shri Navaratnam)
World Bank, IMF agree to hold April meetings online due to COVID-19 risks
WASHINGTON (Reuters) – The International Monetary Fund and the World Bank have agreed to hold their spring meetings, planned for April 5-11, online instead of in person due to continued concerns about the coronavirus pandemic, they said in joint statement.
The meetings usually bring some 10,000 government officials, journalists, business people and civil society representatives from across the world to a tightly-packed two-block area of Washington that houses their headquarters.
This will be the third of the institutions’ semiannual meetings to be held virtually due to the pandemic.
(Reporting by Andrea Shalal; Editing by Chris Rees
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