Data breach, USAA lawsuit: Top banking news August 2024

August 30, 2024 2:27 PM

Enjoy complimentary access to top ideas and insights — selected by our editors.

In August's roundup of top banking news: The impact of National Public Data's breach on banks, USAA agrees to $64 million settlement in overcharging case and more.

Click here to read last month's roundup of banking news.

Elijah Nouvelage/Bloomberg

How First Citizens became the top-performing big bank

Article by Catherine Leffert

First Citizens BancShares is in a different echelon than it was three years ago.

The Raleigh, North Carolina-based company has quadrupled in size since 2021, ballooning to $220 billion of assets. Through its high-profile acquisition of the failed Silicon Valley Bank, First Citizens expanded its footprint across the country and moved into lines of business it had never touched before. The deal came just over a year after First Citizens had already doubled in size with its acquisition of CIT Group.

But in an industry where speedy growth can be correlated with high risk, First Citizens has given investors confidence that it is prepared for the rapid increase in scale. In the last three years, the company's stock price has rocketed some 142%, more than any other publicly listed bank. Shares closed at $1,999.35 on Aug. 20.

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Nathan Howard/Bloomberg

Bank allies say FDIC brokered deposit plan reflects outdated thinking

Article by Ebrima Santos Sanneh

WASHINGTON — Industry experts are raising concerns about a recent Federal Deposit Insurance Corp. proposal that would expand the definition of brokered deposits — sometimes known as "hot money" — and likely discourage banks from holding them.

The proposal largely reverses a 2020 Trump-era FDIC rule that narrowed the definition of brokered deposits as well as modestly broadening the initial scope to include more deposit arrangements regulated as brokered deposits.

Other key changes in the proposal include redefining "deposit broker" to include entities receiving fees for deposit placements, revising the primary purpose exception criteria introducing a new broker-dealer sweep exception. The proposal also updates the application process for primary purpose exceptions, requiring that insured depository institutions themselves submit applications, rather than their nonbank partners. Under the most recent 2020 rule, a broker is exempt if less than 25% of its assets under administration for customers are placed with depository institutions. The proposal would lower that threshold to 10%, reducing the number of intermediaries who would qualify for the exception.

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Banks ponder, 'What's in a name?'

Article by Miriam Cross

For a hot second in 1908, Fifth Third Bank existed as Third-Fifth.

The 166-year-old financial institution was born out of a merger between Third National and Fifth National, two Cincinnati banks. The numbers in the name were reversed after two days so Fifth National got top billing. In the midst of the Prohibition era, "there is a legend that we were not named Third-Fifth because it was too close to three-fifths of whiskey," said Amy Purcell, corporate storyteller and historian at Fifth Third. But that is not true. Most likely, the president of Fifth National won out because his bank had more capital.

No matter the order in which Fifth and Third appear, the name still sounds like a mathematical fraction that makes no sense. But the $214 billion-asset institution has decided, over its 16 decades of existence, to "embrace the quirk," Chief Marketing Officer Melissa Stevens said.

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Social Security Cards in a Row Pile for Retirement

Lane Erickson/Adobe Stock

What National Public Data's 2.7 billion-record breach means for banks

Article by Carter Pape

On Aug. 13, personal data broker National Public Data acknowledged a data breach that involves 2.7 billion pieces of personal information, including names, addresses and Social Security numbers, in one of the largest known data breaches in terms of records leaked.

The records affect a currently unknown number of U.S. victims, including six people who have filed class actions against National Public Data, which is also known as Jerico Pictures. The plaintiffs in the lawsuits allege that National Public Data acted negligently in its failure to protect their personally identifiable information, or PII.

When it publicly acknowledged the breach, National Public Data said the incident involved "a third-party bad actor that was trying to hack into data in late December 2023, with potential leaks of certain data in April 2024 and summer 2024," according to a statement on its website.

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Al Drago/Bloomberg

What Hsu's 'unprecedented' tenure at OCC says about banking policy

Article by Ebrima Santos Sanneh

WASHINGTON — Michael Hsu has led the Office of the Comptroller of the Currency for over three years without being nominated for the permanent job, an arrangement that is unprecedented in its duration.

But some experts say it may also be an indicator that banking regulatory positions are more difficult to fill than they used to be because of heightened partisanship between parties and significant political disagreements even among members of the same party.

Todd Baker, managing principal at Broadmoor Consulting and a senior fellow at Columbia University, said the high value of Senate floor time, the OCC's unique appointment structure and Hsu's own political baggage go a long way toward explaining Hsu's long term as acting Comptroller.

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Krish Swamy, chief data and analytics officer at Citizens Financial Group (above left); Matthew Burris, head of fraud network strategies and data science at Bank of America (middle); and Dan Jermyn, chief AI officer at Commonwealth Bank of Australia (at right.)

Fraud, productivity are top of mind for AI thought leaders in banks

Article by Penny Crosman

Bank technology executives honored on a list of artificial intelligence leaders released in August see no letup in their companies of AI investment and effort, and are focused on practical use cases like fraud detection and personalization.

Krish Swamy, chief data and analytics officer at Citizens Financial Group, expects the bank's investments in AI in 2025 and 2026 will be higher than in 2024.

"We will do fewer things and do them really, really well versus trying to do 20 different things and expecting them to take flight," he said in an interview.

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Zions leaders reflect on lessons learned from 11-year core upgrade

Article by Miriam Cross

The core transformation that consumed Zions Bancorporation for more than a decade has come to a close.

This massive undertaking by the Salt Lake City regional bank, which saw its transition from multiple core providers for different products to the TCS BaNCS system from Tata Consultancy Services in Mumbai, India, was "a blockbuster deal," said Brad Smith, a partner at Cornerstone Advisors. At the time, other deals signed with international cores in the U.S. had flamed out or resulted in lawsuits, halting the market and pushing regional banks to wait and see.

"Most people from the outside would say it was the first successful large-scale U.S. bank core transformation from an international core provider," Smith said.

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USAA agrees to $64M settlement in class action overcharging case

Article by Polo Rocha

USAA has agreed to pay $64.2 million to settle a class action that alleged it overcharged thousands of military members who were subject to interest rate protections.

The proposed settlement, outlined in a federal court filing last week, would resolve allegations that USAA violated the Servicemembers Civil Relief Act and other laws protecting those in the military.

The San Antonio-based bank, which caters to military members and veterans, has denied wrongdoing under the agreement. Some 210,000 people could qualify for the payments if the federal judge in North Carolina approves the settlement.

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Bloomberg/Adobe Stock

Why RBC isn't eager to acquire another U.S. bank

Article by Kevin Wack

As Royal Bank of Canada tries to mend the damage caused by its last major U.S. acquisition, the Toronto-based company isn't looking to buy another big bank on this side of the border.

Chief Executive Dave McKay pledged caution on Aug. 28 about possible future deals for U.S. banks, even though the Canadian company is building capital, and McKay sounded open to using at least some of that capital in the M&A market.

"I would say it's a very high bar to clear," McKay said in response to a question about the potential for large U.S. deals. "So you need a stable market and a stable set of rules to invest in, and we don't have that yet in the U.S."

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Samuel Corum/Bloomberg

Banks want more fintechs regulated under CFPB open banking rule

Article by Kate Berry

Banks remain concerned about the security risks and liability from unregulated fintechs and data aggregators when consumers gain control over their financial data under the Consumer Financial Protection Bureau's data access rule.

Banks and some data aggregators have asked the CFPB for an extended two-year timeframe to comply with the CFPB's final rule on personal financial data rights. The CFPB has received more than 11,000 comment letters on its proposed open banking rule — known in the industry simply as "1033" for its section of the Dodd-Frank Act — which is expected to be finalized in October.

The CFPB's proposal would require financial institutions that offer checking accounts, prepaid cards, credit cards and digital wallets to allow customers to share their data safely with, or transfer the information to, another provider such as a fintech company or data aggregator.

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