Preparing for crises in the banking sector, mitigating cybersecurity risks at banks and third parties, and supervising risks posed by digital assets are the top three challenges for the federal bank deposit insurance agency in 2023, the agency’s watchdog told its board last week.
In a report publicly issued Feb. 16, the Federal Deposit Insurance Corp.’s (FDIC) Office of Inspector General (OIG) said the top challenges it identified and facing the agency this year are “risks to FDIC mission-critical activities and to FDIC internal programs and processes that support mission execution.”
Six other top challenges for the FDIC also identified in the report are:
- Fostering financial inclusion for underserved communities;
- Fortifying IT security at the agency;
- Managing changes in the workforce;
- Improving the FDIC’s collection, analysis, and use of data;
- Strengthening FDIC contracting and supply chain management; and
- Implementing effective governance at the FDIC.
On preparing for banking crises, the report asserts that the agency faces “readiness challenges” to develop plans to respond to an unfolding crisis. That includes, the report states, taking into account climate-related risks.
As for mitigating cybersecurity risks at banks and third parties, the report asserts that the agency faces challenges to ensure that examiners “have the skillsets and knowledge to conduct information technology examinations that adequately identify and mitigate cybersecurity risks at banks and their third-party service providers (TSP).”
The agency should also ensure, the report states, that it has effective processes for the intake of banks’ cybersecurity incident reports, and that those reports are used to “mitigate identified risks, identify trends and patterns of nefarious activity, and adjust supervisory processes.” Mitigating that risk is critical, the report states, “as a cyber incident at one bank or TSP has the potential to cause contagion within the financial sector.”
Digital assets, the report notes, are now held by about 52 million Americans with 136 banks providing ongoing or planned digital asset activities. “The FDIC should work with other regulators to provided clarity regarding the regulation of digital assets,” the report states. “The FDIC should also have examiners with appropriate skillsets and examination processes to assess the safety and soundness of banks’ digital asset activities and identify consumer risks. Further, the FDIC should ensure that its examinations, policies, and procedures address consumer risks regarding digital assets, including the relationship of deposit insurance and digital assets.”
Top Management and Performance Challenges Facing the Federal Deposit Insurance Corporation