$10 billion is a special kind of tipping point for regional banks. As these institutions inch toward that magic number of total consolidated assets, a litany of concerns (and ballooning costs) arise as they become subject to Dodd-Frank Act stress test (DFAST) requirements. Today’s heightened uncertainty surrounding regulation only adds to the scrutiny that <$10 billion banks are under, not to mention to data security risks that develop parallel to growth.
The $5 Billion Sweet Spot: Firms need to invest a year or two in prep work for increased regulation, making strategy and information security shifts to meet the growing costs of compliance. The $5 billion mark is when regional banks should really start to gear up for change. This usually involves scouting new c-suite members from Chief Risk Officers to CISOs and staffing up with new departments and external vendors to meet a robust set of compliance and data security needs. Regulators will expect firms to have plans in place at the cusp of the $10 billion mark, traditionally around $7-8 billion in consolidated assets. Given the timeline and expectations, the halfway $5 billion threshold is the ideal time to start putting the machinery in place to run like a larger financial institution.
Big Bank Framework: Regional firms will find the ground shifting beneath them leading up to these key milestones. Hitting $10 billion in assets means that small-scale banking strategies are no longer viable. Expenses rise within this regulatory landscape, and the pressure is ripe to make up for costs with increased revenue and profitability. Banks need to understand the big bank framework from enacting scalable business models to reworking their data security strategy. In large part, regional banks need to take a page from the big bank playbook and implement these strategies without replicating complex (and costly) back office solutions.
Security as a Competitive Edge: Get ready. Data security and access are only going to become larger, more complex issues as firms grow and face increased regulatory scrutiny. Being able to access your regional bank’s risk profile and make your data actionable is key. Banks will need more on-hand talent and technical expertise than ever before, alongside historical and centralized data, and expert analysis to make sense of it all. Bigger banks are focusing on security and you must too in order to be competitive — that means taking stock of your unstructured data, as well as implementing Identity Access Management (IAM) and Privileged Access Management (PAM). Regional banks need to take note of big bank information security and adopt these instruments as part of their greater data governance framework.
Proactive Risk Management: Along with competent data visibility, safeguarding data networks amid the expanding threat of cybercrime is critical. Regional banks are often more vulnerable to breaches than their larger counterparts. In response, risk committees are becoming increasingly common to evaluate risk profiles from financial viability to information security risk. Data governance, remediation and access management will work to enhance cross-departmental visibility to mitigate compliance and minimize risk.
Want to learn more about what information security vulnerabilities regional banks face on the road to $10 billion? Talk to our team of data experts and learn how you can cover your regulatory bases.