March 29, 2019

Banking in the Face of a Natural Disaster - Weathering the Storm and Mitigating the Harm

When a natural disaster such as hurricanes, floods, and wildfires hits a community, the results can be devastating. Not only does the natural disaster impact the daily lives of the customers of banks, but it has an impact on every aspect of bank operations and servicing. In those difficult times, there can be stress on the customer relationship, increased scrutiny from the regulators, adverse publicity and a challenge simply to operate the business functions of a bank in the ordinary course. It is imperative that financial institutions carefully construct contingency and business resumption plans. They should also carefully considered the customer impact of any servicing modifications or accommodations to be made in such an emotional time. 

After a natural disaster, an individual’s life can be turned upside down, and access to their money and bank can be a primary need. While online and mobile banking advances in recent years have helped the issue, the need to have detailed and comprehensive branch banking and overall banking business resumption and contingency plans in the event of a natural disaster are important. Dating back to the tme just after Hurricane Katrina, The Federal Financial Institutions Examination Council (FFIEC) member agencies (regulatory agencies) and the Conference of State Bank Supervisors compiled comments made by financial institutions regarding lessons they learned from the effects of Hurricane Katrina. Major challenges faced by these institutions included the following:

  1. Communications outages made it difficult to locate missing personnel.
  2. Access to and reliable transportation into restricted areas were not always available.
  3. Lack of electrical power or fuel for generators rendered computer systems inoperable.
  4. Multiple facilities were destroyed outright or sustained significant damage.
  5. Some branches and ATMs were underwater for weeks.
  6. Mail service was interrupted for months in some areas.
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