From cybersecurity to failed mergers, 5 challenges facing banks and credit unions

March 11, 2024 5:30 AM

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Major banks and credit unions are currently facing a variety of challenges including data breaches and cybersecurity concerns, share price plunges, regulatory pressures and a tougher environment for bank mergers.

Read more about these issues and others facing major banks and credit unions below.

Adobe Stock and Angus Mordant/Bloomberg

Cyberattack leaves 57,000 Bank of America accounts vulnerable

A ransomware group known as LockBit committed a cyber breach of Infosys McCamish, a financial software provider, compromising personally identifiable information of 57,028 deferred compensation customers whose accounts were serviced by Bank of America.

Infosys McCamish said in its letter to affected customers that the Nov. 3 attack had rendered some of its systems unavailable, and it is "unlikely" that it would be able to determine with certainty what personal information the threat actor accessed during the breach.

"Reliance by banks on third-party service providers has grown considerably in recent years, and with that reliance comes the potential for greater cyber risk," Michael Barr, the Federal Reserve's vice chair for supervision, said at a conference in January. "It is ultimately the responsibility of banks to manage their third-party risk, and we have historically seen gaps in this regard."

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Data breach affects 57,000 Bank of America accounts

Benjamin Girette/Bloomberg

Citi warned by Fed to address risk management

Citi received three notices from the Federal Reserve at the end of 2023, enacting six-month and 12-month deadlines for the bank to change the way it measures particular risks, according to Reuters, which cited an email and an anonymous source. Citi also recently failed exams by the Office of the Comptroller of the Currency.

"We're making steady progress simplifying and modernizing our bank,"a statement from Citi read. "Like any multiyear effort of this scale, progress isn't linear and there are important learnings along the way that we're incorporating into our efforts, including in the areas of regulatory reporting, infrastructure and data enhancement. We continue to advance this critical body of work."

Read more:

Regulators push Citi to move faster on risk management fixes: Report

New York Community Bancorp Chairman Alessandro DiNello seated at a desk at left, and President and CEO Thomas Cangemi in separate photo on right.

New York Community Bancorp said in February that Alessandro DiNello (left) has moved from nonexecutive chairman to executive chairman. He was president and CEO of Flagstar Bancorp until its acquisition by New York Community in late 2022. Thomas Cangemi (right) remains president and CEO.

New York Community appoints executive chairman after share price plunged

The parent company of Flagstar Bank appointed Alessandro DiNello, the former president and CEO of Flagstar who had been serving as nonexecutive chairman of New York Community, as executive chairman of the $116.3 billion-asset company in February. DiNello was named nonexecutive chairman in December 2022, when New York Community acquired Flagstar.

This move came after the company's share price plunged by more than 59% during the first week of February.

In a press release, New York Community said that DiNello "will work alongside" President and CEO Thomas Cangemi and the rest of the senior executive leadership team "to improve all aspects of the bank's operations."

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New York Community elevates former Flagstar CEO amid continuing turmoil

First Horizon looks forward after TD Bank merger deal fails

After the demise of its 2023 merger deal with TD Bank, First Horizon worked to bring in new depositors last year by paying high interest rates, and has so far kept most of its depositors. The bank also garnered new customers as competitors in the Southeast pulled back from certain lines of business.

One path forward for First Horizon is, of course, another attempt at a merger. There's "real value" in the Memphis, Tennessee-based bank's franchise, Chris Marinac, an analyst at Janney Montgomery Scott, told Polo Rocha, staff writer at American Banker. Loyal customers in its high-growth Southeast markets should be attractive to a would-be buyer.

Unfortunately, bank mergers are at a low as high interest rates continue to dampen M&A activity across the industry. Additionally, heightened regulatory scrutiny over bank mergers reportedly helped kill TD Bank's attempted purchase of First Horizon. Any future deal involving First Horizon would be likely to once again trigger scrutiny from Biden administration regulators.

Read more:

First Horizon navigates TD deal's demise, but big tech investments loom

Regulators bring Navy Federal contract with Department of Defense to a standstill

Navy Federal Credit Union is struggling to fulfill its contracted service with the Department of Defense to provide banking to military personnel serving abroad, as its regulator, the National Credit Union Administration (NCUA), said it cannot provide deposit insurance according to the terms of thes deal.

"It is rare that we see resistance to our mission-driven efforts that we are experiencing from the NCUA," Mary McDuffie, CEO of Navy Federal, told American Banker via email. "Without a committed insurance partner in this OMBP endeavor, the NCUA is going to leave service members and their families overseas without the financial support that they deserve."

The contract would give Navy Federal 60 banking facilities and 275 ATMs throughout Europe and the Pacific.

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Navy Federal, NCUA deadlocked over Department of Defense contract