ACH Debit Entry Fraud

Banks and financial institutions rely on technology to operate successfully and provide the best products and services for customers. With technology, though, comes the heightened risk of falling victim to wire fraud schemes that can result in significant financial losses.

One example of this is Automated Clearing House (ACH) debit entry fraud, when a bad actor executes ACH transfers from a victim’s bank account into an account controlled by the fraudster. Because of the rising popularity in using ACH transfers and strict National Automated Clearing House Association rules, banks and financial institutions have never been more at risk: According to the most recent Federal Reserve Payments Study, the number of ACH debit transfers (16.6 billion) exceeded the number of check payments (14.8 billion) for the first time in 2018. In 2000, to provide context, there were 42.6 billion check payments and only 2.1 billion ACH transfers.

“More people and businesses are using this type of transaction, but financial institutions should be aware of the risks involving ACH and the potential for fraud,” said Jerry Keup, National Underwriting Officer, Banks and Diversified Financial at Travelers. “There are steps these institutions can take to reduce the likelihood of a fraudulent incident taking place, but they should be vigilant and address any vulnerabilities seriously.”

Risk mitigation steps include, but are not limited to:

Develop methods to identify synthetic identity fraud. The Federal Reserve bank has identified red flags to aid in recognizing synthetic identity fraud. These include paying close attention to accounts that show:

  • The credit file depth is inconsistent with the customer age or other profile information.
  • Multiple identities with the same Social Security number.
  • Multiple applications from the same phone number, mailing address or IP address.
  • Use of secured credit lines or piggybacking to build credit.
  • Social Security numbers issued after 2011.
  • Multiple authorized users on the same account.

Monitoring and analytics. Using software and analytic data can often detect financial crime attempts much faster than the human eye.

But even the best controls can fall short. Travelers offers a wide range of coverages for financial institutions, including an endorsement that covers two specific ACH scenarios:

  • A fraudster opens a deposit account with a bank or credit union, then feeds that account with stolen funds from victims through ACH pulls.
  • A fraudster establishes a loan or line of credit with a bank or credit union and causes ACH transfers from victims’ accounts to repay the loan or line of credit.

Preventive measures taken or reinforced now against ACH fraud attempts can lead to positive results in the future. It’s worth the time and investment.

Travelers is committed to managing and mitigating risks and exposures, and does so backed by financial stability and a dedicated team – from underwriters to claim professionals – whose mission is to insure and protect a company’s assets. For more information, visit or talk to your independent insurance agent about ACH coverage.

Crapo, Idahoans Highlight Concerns with IRS Bank Reporting Scheme


October 14, 2021

Crapo, Idahoans Highlight Concerns with IRS Bank Reporting Scheme

Participants discuss privacy, other concerns in roundtable discussion

BOISE–Idaho’s U.S. Senator Mike Crapo, Ranking Member of the Senate Finance Committee, joined Idaho leaders, concerned constituents, and business and financial leaders for a roundtable discussion on a proposal to create a reporting scheme where financial intermediaries report to the Internal Revenue Service (IRS) on customer deposits and withdrawals.

The Biden Administration and congressional Democrats are considering an $80 billion boost in IRS funding, and implementing a reporting dragnet under which local banks, credit unions and payment providers will essentially be turned into agents of the IRS, monitoring and reporting of inflows and outflows on deposits and withdrawals made in private accounts.  This proposal raises a number of serious concerns regarding Americans’ privacy; data security; and a massive amount of paperwork and confusion for taxpayers and the IRS.  In light of these proposals to massively expand the IRS with unprecedented amounts of mandatory funding, and the IRS’s continued abuses of taxpayer rights and privacy, Senator Crapo has introduced legislation to place important guardrails around and IRS funding to protect taxpayer rights and privacy, the Tax Gap Reform and IRS Enforcement Act.

From the discussion:

U.S. Senator Mike Crapo, Idaho, Ranking Member of the Finance Committee

“I think this is the biggest violation of personal privacy that has ever even been proposed, let alone enacted, by the United States government, and it’s something that every American ought to be incredibly worried about.”

Idaho State Treasurer Julie A. Ellsworth

“It is an egregious overreach. It is essentially going to be a daily ongoing audit of every person who are law abiding citizens—at least give us the opportunity to be accused of something.”

Idaho State Controller Brandon Woolf

“One of the other big concerns I share as State Controller is the unintended consequences of what this may bring.  For example, I fear for our financial institutions of what may happen if people choose to ‘unbank,’ and cybersecurity, which is a daily threat that we deal with constantly.”

Aaron Briggs, Financial Expert, Boise Wealth Management

“I feel those inflow and outflow boxes, without itemization on each purchase, leaves open to interpretation for the U.S. government and the IRS to decide what number they want tax on any account.  The overarching thing, is they want to bring in more control and to get at peoples data or money. . . This is supposed to be for high net-worth individuals and billionaires, to make sure they’re not skirting the issue on paying taxes.  One of the reasons they included the $600 or above account balance to be monitored, is so a billionaire or high net-worth individual can’t have multiple accounts to hide those assets.  I’m sorry, but $600 on someone who is a high net-worth individual or billionaire; how many accounts are we talking about?  That doesn’t seem like a good excuse to say that’s why the threshold is $600.  Really, it is just an overreaching part of the government to monitor everybody’s accounts.  I don’t think that should be what is done, and I have clients that feel the same way.”

Adam Lyman, ABCO Engineering, Nampa

“I spend tens of thousands of dollars preparing my taxes every year.  It takes months and months to do this stuff just to comply with what the government requires. . . For people like me, an overregulating government is putting burdens on us that are restricting the amount of people I can help.  The best I do every day is know people are paying mortgages because of my efforts.  And this is just another way to keep me from doing that for people.  It’s onerous, [and] it’s a violation of privacy.  The government does not want me to [succeed], obviously.  And this is just one more brick on the wall to stop me from being successful.”

Platt Thompson, Idaho entrepreneur

“This invasion of privacy with regard to our personal finances is particularly egregious; it’s beyond the pale that the government will be able to observe, mark and data mine all of my transactions.  It is a horrific proposal for anyone who values personal privacy and more than that, personal freedom.”

Jessica Trawick, U.S. Air Force veteran, Rover independent contractor and Idaho entrepreneur

“I’m starting my own small business and me and people like me are trying to figure out the tax code and tax law and wondering why we are being targeted. This hits everyone.  If the highest part of our population’s wealth is at the top, why is it independent contractors and low-level small businesses–growing people–being targeted? People within my small business groups feel we are being unfairly attacked in a system already designed to make it harder for us to get started.”

John Evans, Jr., President, D.L. Evans Bank

“The proposal would create a significant burden for small business, banking and credit unions.  Bankers firmly believe that Americans should honor their tax obligations, but requiring banks and credit unions to report every single transaction is just ridiculous to be honest with you.  Every inflow and outflow coming out of an account is reported.  And as you mentioned, the IRS is a constant target of cyber criminals, and recently suffered significant data breaches. . . The regulatory burden for all of us is just unbelievable.”

Kent Oram, President and CEO, Idaho Central Credit Union

“The privacy overreach is astounding.  And to imagine—you know, there is sometimes the way politics goes is we talk about $600 but then we follow what about $2,000 or what about some other number—well it doesn’t matter what number, it can be a penny or a million dollars, it doesn’t matter, it’s the same amount of work on America’s financial institutions to comply with something like this. . . This is a massive overreach and we oppose it.”

Deneen May, President for Western Idaho, Zions Bank

“We are deeply concerned that this proposal would put customer privacy and data security at risk.  An unprecedented amount of taxpayer information such as payments on loans, transfer between a taxpayers various bank accounts, would be captured and recorded.  This information would be massive and have little relevance to taxable income.  Finally, the legislation would increase compliance cost to individuals and small business.  The proposed in-flow and out-flow reporting appears to small millions of small business owners that operate as sole proprietorships will needless increase their tax preparations cost.”

Todd Erickson, President and CEO, CapEd Credit Union

“This is bad policy, it really is.  We’ve got nearly 90,000 members, most of them are consumer accounts, and they look to us to provide banking services at a low cost to them and also a convenience for them so they can access their accounts.  But the more regulation that comes to us, which is already heaped on the many reporting requirements we have already, consumer protection laws and everything else, is just all that compliance cost is filtered down to the consumer, to the member.  They end up paying the cost for this.  And for what purpose?  So the government can spend more money and they can continue to tax the consumer and small businesses. . . From the banking and credit union’s perspective, a cybersecurity breach is not a matter of if, it is a matter of when.  We spend a lot of money to protect the data of our consumers and our members.  Once the data is within our house, we can protect it; if we send it out, it is out of our control; if it goes to the government and that data breach happens, our consumers will look to us as to why it happened.”

Charley Jones, Owner, Stinker Stations of Idaho

“It’s an amazing time in the U.S.  I’ve never been afraid of Big Brother.  But then I see this, and just my head spins.  You can’t make this stuff up.  I think this is probably proposed by somebody that’s never signed the front of a paycheck.  I’ve had a business for over 50 years.  [We] work hard every day to serve our customers, to be part of America, to be part of this fantastic country.  And then we have bureaucrats who I guess think that we’re evil.  And we’re not, we’re good people.  And we work hard.”

The Administration and congressional Democrats’ proposed IRS financial institution reporting scheme raises a number of serious concerns:

  • Privacy: Existing law protects the privacy of confidentiality of personal financial records, and the overwhelming majority of Americans honestly report and pay their tax liabilities.  This proposal creates unnecessary additional scrutiny with no proven benefit.
  • Data Security Concerns: The IRS has an extensive history of leaks, hacks and other violations of taxpayer confidentiality.  This proposal would put additional troves of private taxpayer data at risk of future exposure.
  • Low- and Middle-Income Earners Swept In: While proponents of the measure argue this bank-monitoring dragnet will focus on the “rich” or “billionaires” evading taxes, this scheme will capture everyone with an account at a bank, credit union, brokerage, Venmo, Paypal and more.  This means individual private accounts, or those with business accounts such as plumbers, jewelers, small contractors, and more will be caught up in this scheme.
  • Drowns Taxpayers and the IRS in a Sea of Information:  The breadth of this proposed information reporting dragnet will result in a massive amount of paperwork and confusion for taxpayers and the IRS.  Taxpayers will be juggling multiple additional forms, the IRS will be inundated with paper, and banks will bear increased compliance and reporting burdens on their customers.

Crapo is taking Idahoans’ concerns back to Washington, D.C., where he will continue to fight against the IRS proposal and Democrats’ upcoming reckless tax-and-spending plans.



Idaho Bankers Association Announces the Launch of Virtual Human Resources Committee


Idaho Bankers Association Announces the Launch of Virtual Human Resources Committee

The IBA Human Resources Committee is a new IBA member networking opportunity for HR heads, directors and managers of banking institutions or their designates. Offered exclusively to IBA members, it is a unique opportunity to learn about the banking industry and the latest in human resources trends and practices from industry experts. Through virtual meetings, webinars and other exchanges, the group will explore: staffing models; regulatory changes and interpretations affecting compensation and benefits; new case law affecting HR managers; market updates; recruitment; training; employee retention; benefits trends; and compensation study results.

The IBA Human Resources Committee will hold virtual meeting the second Tuesday of each month (minus December) from 9:30-10:30am MT with our first meeting being held on Tuesday October 12th. Our virtual meetings will feature relevant guest speakers, as well as discussions on topics of interest to the networking group.

Our first meeting presentation will be:

Diversity, Equity, Inclusion & Belonging
Jennifer Bouman-Steagall
Dynamic Storyteller & Pacific Northwest Defense Attorney
Sponsored by:

What: IBA Human Resources Committee
When: Tuesday, October 12th at 9:30 MT
Where: Zoom Meeting

To register for the first meeting taking place Oct. 12, click here.

Question about the IBA Human Resources Committee, please contact Trent Wright.

IBA’s Washington DC Update for Sept. 8, 2021

IBA ABA Virtual Washington Fly-in Information – Sept. 27-29

We’re excited to announce that registration in now open for the Virtual Washington Fly-In this September 27-29. We kick things off with an ABA briefing and meetings have been confirmed with the FDIC, OCC, FinCEN and the Federal Reserve Board. We expect to confirm the CFPB briefing very soon and we have an invitation out to Treasury to join as well. We’re also hosting an orientation session on Thursday, September 23rd for new advocates and emerging leaders. While IBA would much prefer to be meeting with everyone in person in DC, these engagements with agency leadership are valuable even in the virtual format. Please don’t hesitate to reach out with any questions.

Join us Sept. 27-29 so you don’t miss out on the opportunity to hear from ABA and agency leadership including:

Michael J. Hsu
Acting Head
Comptroller of the Currency


Jelena McWilliams
Federal Deposit Insurance Corporation


Michelle W. Bowman
Board of Governors of the Federal Reserve System


Rob Nichols
President and CEO
American Bankers Association


Learn more and register at

IBA Opposes Proposed IRS Reporting Requirements in Letter to Idaho Delegation; Bankers Urged to Contact Congress

In a letter to the Idaho Congressional Delegation this week, the Association strongly opposed proposed new Internal Revenue Service reporting requirements that are under consideration in Congress.  The proposal mandates that banks collect and share account and transaction information on millions of customers with the IRS in an effort to increase tax compliance.

The letter notes that, “the new reporting requirements…are extremely expansive, will be complicated and burdensome for the industry to implement, and would intrude into the lives of nearly every individual with a bank account.”  In addition, the Association stated that, “Smaller community banks, which comprise the vast majority of IBA’s membership, will be especially burdened by this mandate, which requires an expensive compliance effort to track and report inflows and outflows on all bank products.”

ACTION NEEDED: All bankers are urged to contact Congress in opposition to the IRS reporting proposal, which is likely to be considered during debate on the house budget reconciliation package in the coming days.  The American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA) have sample letters to send to Idaho’s Delegation. In addition, ICBA has resources to share with your customers to encourage them to oppose this proposal as well.  To access the ABA resources, click here, to access the ICBA resources, click here.

To read IBA’s letter to Senator Crapo, click here.

CFPB Releases Long-Anticipated Small Business Data Collection Proposal

This week, the Consumer Financial Protection Bureau (CFPB) released the long-awaited proposal for implementing Section 1071 of the Dodd-Frank Act, which mandates that lenders collect credit application data for small businesses, including women-owned and minority-owned small businesses. The more than 900-page proposed rule requires banks and other lenders to report: the amount and type of small business credit applied for and extended; the race, ethnicity and sex of the small business owners; and several key elements of the price of the credit offered.

The rule applies to all banks, credit unions and nonbank lenders that originate at least 25 credit transactions in each of the two preceding calendar years that meet the definition of “business credit” under Regulation B and that involve “small businesses”.  Under the proposed rule, “small businesses” are defined as businesses with $5 million or less in gross annual revenue for the business’ preceding fiscal year.  The proposed rule covers business and agricultural-purpose loans, lines of credit, credit cards and merchant cash advances.

Similar to Home Mortgage Disclosure Act (HMDA) data collection, banks would be required to collect data on a calendar-year basis and report it to the CFPB by June 1 of the following year.  The Bureau will make the data available annually to the public on its website, and the proposal seeks input on whether any information should be redacted from the public data set to protect privacy of small businesses.

The Association is reviewing the proposal and plans to submit comments to the CFPB.  Comments are due 90 days after the proposal is published in the Federal Register.

To read more and download the proposed rule, click here.

Banking Agencies Release Guide on Fintech, Community Bank Partnerships

The federal banking agencies on Friday released a guide to help community banks asses risks when considering partnerships with fintech companies. The guide focuses on six key due diligence topics, including business experience and qualifications, financial condition, legal and regulatory compliance, risk management and control processes, information security and operational resilience.

The agencies said community banks may use the guide when performing due diligence on prospective relationship, but added that it is voluntary and does not cover all types of third-party relationships and risks.

The guide is written from a community bank perspective, the agencies said, but added that the fundamental concepts may be useful for banks of varying size and for other types of third-party relationships.

To read more, click here

FDIC review could indicate more virtual bank exams

The Federal Deposit Insurance Corp.’s request for input on how well virtual bank examinations have gone over the last 18 months could be a sign it plans to do more supervision remotely going forward. Some say face-to-face interaction is needed for clear communication between banks and examiners, while those in favor of remote examinations say they reduce travel time and burnout among examiners.

To read more, click here



IBA’s Washington DC Update for July 30, 2021

Consumer Credit Applications Return to Pre-Pandemic Levels

Consumer credit applications, including for mortgages, car loans and credit cards, have mainly returned to pre-pandemic levels, according to a report from the Consumer Financial Protection Bureau.

New mortgage applications saw an initial decrease but were still above usual levels by May 2020 and remained so 12 months later. Following that recovery, new mortgage inquiries showed the same seasonal patterns as in prior years, although they consistently exceeded their usual volume by 10 to 30 percent.

 To read more, click here.

 CDC Recommends Masks in Public Indoor Settings in High Transmission Areas

This week, the Centers for Disease Control and Prevention (CDC) updated its guidance and is now recommending that fully vaccinated people wear a mask in “public indoor settings in areas of substantial or high transmission.”  While the guidance does not specifically define “public indoor settings,” it may include spaces such as branch lobbies or other areas in banks where customers may gather.  The guidance was updated as a result of the high transmission rates of the COVID-19 Delta variant.

To read the updated CDC guidance, click here.

SBA Issues Direct PPP Loan Forgiveness Guidance

The Small Business Administration (SBA) recently announced that it will begin accepting Paycheck Protection Program (PPP) loan forgiveness applications directly from borrowers for loans of $150,000 or less.  As part of this effort, the agency issued guidance to implement the new direct borrower forgiveness process, which is an “optional technology solution that SBA is providing to PPP lenders that will leverage SBA’s existing and proven platform.”

Banks that are PPP lenders must opt-in to the direct borrower forgiveness program.  Participating institutions will receive a single secure location for their borrowers with eligible loans to apply for forgiveness through the platform using the electronic equivalent of SBA Form 3508S.  Once a bank is notified that a borrower has applied for forgiveness directly, the institution must review the loan forgiveness application and issue a forgiveness decision to SBA.

The forgiveness platform will begin accepting applications from borrowers on August 4, 2021, and SBA also noted that it will issue additional guidance to lenders regarding the opt-in process and how borrowers and lenders will access the platform.

To read more, click here. To opt-in to the direct forgiveness program, click here.

Treasury Expands Vaccination Paid Leave Tax Credit

In related news, the Treasury Department announced this week that it will allow certain eligible employers to claim tax credits for providing paid time off to employees to take a family or household member or certain other individuals to get vaccinated, or to care for a family or household member or certain other individuals recovering from the vaccination.

As we reported previously, Treasury announced a tax credit under the American Rescue Plan Act of 2021 earlier this year that allows small and midsize employers with fewer than 500 employees to claim refundable tax credits that reimburse them for the cost of providing paid sick leave and family leave to their employees due to COVID-19, including leave taken to receive or recover from COVID-19 vaccinations.

To read more, click here.

Biden Administration Announces New COVID-19 Relief Programs for Homeowners with HUD, VA and USDA Loans

Late last week, the Biden Administration announced new relief initiatives to help mortgage borrowers with loans through the Department of Housing and Urban Development (HUD), Department of Veterans Affairs (VA) and the Department of Agriculture (USDA) avoid foreclosure after they exit forbearance.  According to the announcement, the steps will “bring federal agency options closer in alignment with payment reduction and loan modification options for borrowers with Fannie Mae and Freddie Mac mortgages.”

Specifically, HUD will begin offering a standalone partial claim option for borrowers who are able to resume their current mortgage payments, as well as a loan modification option that would extend the term of the mortgage to 360 months at market rate and targets reducing the borrowers’ monthly principal and interest portion of their monthly mortgage payment by 25 percent.  In addition, USDA and the VA will begin offering new alternatives for borrowers to help them achieve up to a 20 percent reduction in their monthly mortgage payments.

To read more, click here.


Consumer Credit Applications Return to Pre-Pandemic Levels

Published on July 30, 2021 by BankBeat

Consumer credit applications, including for mortgages, car loans and credit cards, have mainly returned to pre-pandemic levels, according to a report from the Consumer Financial Protection Bureau.

New mortgage applications saw an initial decrease but were still above usual levels by May 2020 and remained so 12 months later. Following that recovery, new mortgage inquiries showed the same seasonal patterns as in prior years, although they consistently exceeded their usual volume by 10 to 30 percent.

Auto loan applications fell drastically early in the pandemic, dropping 52 percent over the month of March 2020, compared to a typical 1 percent drop in previous years. Providers recovered most of that initial drop by June 2020.

Credit card inquiries also saw a large drop early in the pandemic and stayed lower for much longer, remaining 30 percent below pre-pandemic levels in September 2020. Typically, these inquiries spike in the holiday season but remained below normal numbers in the last weeks of 2020. Those numbers had recovered by spring and stayed at usual levels between March and May, indicating the recovery was unlikely to be only a response to the March stimulus payments, the report found.

Despite those recovery trends, customers with deep subprime and subprime scores still have not recovered to pre-pandemic levels, likely partially due to tightening credit, according to the report. At the same time, auto loan and credit card applications of customers with super prime scores also did not fully recover to their pre-pandemic level, likely due to depressed demand for those types of credit among these consumers.

Mortgage and auto loan application recoveries also widely varied across geographic regions, while the rebound in credit card applications was more geographically uniform across the country.

Idaho Bankers Association President & CEO Trent Wright said that growth in credit requests is evident in Idaho, a state with a booming economy and growing population of people from Texas, California and Washington. Census numbers from last year revealed Idaho had narrowly missed taking the No. 1 Census spot for state population growth over the last decade — 17.3 percent, far higher than the U.S. average of 7.4 percent. He attributes the state’s growth to its quality of life, relatively low tax rates and regulations and strong business community.

“Everybody here is incredibly busy,” Wright said of bankers.

Tennessee Bankers Association President Colin Barrett said credit situations vary depending on location and type. Some banks have reportedly seen strong commercial and housing demand after capital was accumulated during the pandemic.

Idaho Nevada Bankers Associations’ (hybrid) Annual Convention

June 28-30, 2021 in McCall, Idaho – Registration is Open

The Idaho and Nevada Bankers Associations have teamed up to bring a special program to bankers across the region, focusing on current issues, public policy and government relations – all with plenty of networking opportunities.

The banking industry needs a unified voice now more than ever, as bankers work to help their customers and their institutions emerge from the COVID-19 pandemic amid changing local and national political climates.

Join us June 28-30 in McCall to listen and lend your voice, strengthening the perspective and impact from banks that are leading our econemy and communities.

Expected Attendees Include

Bank CEOs and presidents  |  CFOs, COOs and Directors  |  EVPs, SVPs and VPs  |  Managing Directors  |  Bank Counsel  |  Partners  |  Emerging Leaders

What Does HYBRID Mean?

The 2021 IBA/NBA Convention is being planned as a hybrid event which means it will be both in-person and virtual. The in-person part of the meeting will take place at the Shore Lodge Resort in McCall, Idaho.

As of now, single room in-person attendance is limited, however everyone will be able to attend in-person by watching the live streamed sessions in a separate room or from the comfort of your hotel room, home or work.

This will allow more attendees to be able to participate in other aspects of the in-person conference such as the exhibit hall, social activities, and ancillary activities. Virtual attendance is unlimited, so if you are unable to make it to the in-person event, you can still access all the conference content!

This will be a truly unique convention and we anticipate strong in-person attendance. Sessions are still being finalized but will include a line up of great speakers , and much more!





Idaho Banks Receive $7,360 in Distributions from American Bankers Mutual Insurance, Ltd. $91.3 million has been declared in total distributions since 1991.

BERMUDA February 15, 2021: American Bankers Mutual Insurance, Ltd., the reinsurer for the directors and officers (D&O), bond and cyber insurance program co-endorsed by American Bankers Association (ABA) and Idaho Bankers Association (IBA), declared a $2.5 million distribution to be shared by qualified ABA member banks insured through ABA Insurance Services, a member of Great American Insurance Group.

This is the 31st consecutive year that the industry’s leading professional liability and bond insurance provider has declared distributions to eligible ABA member banks, bringing the total to $91.3 million since the program’s inception. Banks that purchase their directors and officers, bond, cyber and related insurance from this program and are current ABA members are eligible to receive a distribution.

“Even during periods of economic uncertainty, this program provides a stable source of insurance and continues to offer meaningful distributions for our members,” said Rob Nichols, ABA president and CEO. “This is one of the many ways an ABA membership can add value for your institution.”

“This is a testament to the hard-working team at ABA Insurance Services that continues to focus on providing high-quality service to our bank clients during the pandemic,” said Gary Hemmer, chairman of American Bankers Mutual Insurance Ltd. and chairman of the board of First National Bank of Waterloo in Waterloo, IL.”

About American Bankers Mutual Insurance, Ltd.
American Bankers Mutual Insurance, Ltd. is a bank-owned, mutual insurance company that reinsures policies written for the ABA-endorsed insurance program.

About ABA Insurance Services
ABA Insurance Services, a Member of Great American Insurance Group, serves the banking industry by offering D&O, bond, cyber, and related insurance to financial institutions across the country. Co-endorsed by American Bankers Association and Idaho Bankers Association, this unique insurance program has been a market leader since 1987 and is recognized by insurance and banking professionals as a secure, stable, and affordable source of coverage. For more information about ABA Insurance Services, call 800-274-5222 or visit

About American Bankers Association
The American Bankers Association is the voice of the nation’s $21.2 trillion banking industry, which is composed of small, regional, and large banks that together employ more than 2 million people, safeguard $17 trillion in deposits and extend nearly $11 trillion in loans.

Protection Against ATM Thefts

Article written by: Travelers  Insurance

In addition to all of the everyday risks banks and credit unions need to guard against, the COVID-19 pandemic has resulted in a significant increase in the number of ATM thefts across the country. The spike hasn’t been surprising due to a number of factors, but the costs and damage resulting from these attacks are often considerable. Fortunately, there are steps banks and credit unions can take to help prevent becoming a victim of ATM theft.

During challenging financial times when people are facing desperate situations, there is usually an uptick in bank robberies. There was an increase throughout the 2009 recession, for instance. With the pandemic in 2020, there was an increase in the U.S. unemployment rate, with more people out of work and ample time on their hands.

Because COVID limited the number of people permitted in indoor facilities – or prevented them from entering altogether – bank lobby access was impacted, forcing more customers to use the ATM, which is often outside or in an entryway. Since more of a bank’s customers are not going into the lobby but instead are using the bank’s ATM, more money is being placed in the machines to meet demand. Thieves were quick to catch on to this practice, and began targeting ATMs with more frequency. Often, a vehicle or piece of construction equipment is used to dislodge and remove the entire ATM.

“Smash-and-grab events have become quite common, and they can be rather costly because in addition to the money lost, there is often physical damage to the building,” said Tracey Santor, Product Manager for Financial Institution Bonds at Travelers. “There are a number of steps banks should strongly consider taking to reduce this risk, including purchasing ATM insurance coverage.”

Deterrents include:

  • Installing concrete barriers or bollards around the ATM to make it more difficult for thieves to access the machine using a vehicle or machinery.
  • Adding lighting and surveillance cameras.
  • Placing dye packs and GPS devices inside an ATM so if the machine is jostled or removed, the packs explode and the location can be tracked.

Even though FI bond crime insurance coverage is required by regulators, ATM coverage is not mandatory, and it can be added to the bond and P&C policy as an endorsement, even if the machine is not located on the premises. Without it, an ATM theft wouldn’t be a covered event. Insurance carriers such as Travelers have products and resources available so banks and credit unions have coverage when a crime occurs.

According to a recent article from The Wall Street Journal, the number of attempted ATM smash-and-grabs increased by 150% from 2019 to 2020. Now is the time to ensure your bank has done everything possible to protect against this type of incident. To learn more, have a conversation with your insurance broker or agent, or reach out to an insurance carrier.

Travelers is committed to managing and mitigating risks and exposures, and does so backed by financial stability and a dedicated team – from underwriters to claim professionals – whose mission is to insure and protect a company’s assets. For more information, visit or talk to your independent insurance agent about social engineering coverage.

Tactics for Navigating Tectonic Shifts in Liquidity

Scott Hildenbrand
Managing Director
Head of Balance Sheet Analysis and Strategy
Head of Piper Sandler Hedging Services

This year has presented bank management teams with a multitude of issues to juggle, many of which seemingly pull in opposing directions, and most of which were not firmly on the radar to start the year. Such is life in 2020. Some banks’ primary concerns stem from the fact that the industry has seen a shift in liquidity. Balance sheets are awash with deposits relative to recent periods while securities holdings have come down relative to assets. The build in balance sheet liquidity has come in the form of cash, with an unusually high 7.6% of assets held in cash and equivalents as of June 30.

This drastic change in the liquidity picture is best encapsulated by the significant uptick in the Cash and Unencumbered Securities-to-Assets Ratio. The ratio has surpassed the average over the past fourteen years of 20.6%, steadily climbing toward the high of 24.7% last seen in 1Q13. Source: S&P Financial, Banks and thrifts with assets between $250 million and $25 billion

While every institution is unique, many banks have responded to the shift in liquidity by asking two questions: how does this affect the asset side, and what are the options on the liability side? On the asset side, management teams wonder what to do with excess cash in a world where most bond yields are disappointingly low. Even though liquidity profiles appear strong and are trending stronger, economic uncertainty creates unpredictability in depositor behavior.

As such, some institutions feel more comfortable with investments that maintain maximum flexibility in the future – sale-ability and pledge-ability – with lower yield as a tradeoff. Other institutions have looked to extend their investment portfolios further out on the curve to increase yield, while mitigating tail risk by match funding with 5 + year structures at historically low rates. For instance, banks have worked with some firms to utilize their inexpensive, longer-dated funding mechanisms at attractive rates.

Many corners of the banking industry are concerned that low rates, slower loan origination, and excess liquidity trends are here to stay for the foreseeable future, and have begun the search for loan surrogates. Allowing these banks to extend the duration of their liability portfolio, at a scalable level, opens the door to more asset purchase strategies. We have seen two specific asset strategies gain momentum: exploring community and regional bank subordinated debt as an investment option, and analyzing how to invest in municipals without ruining their interest rate plan. As an alternative to extending the liability portfolio, some institutions have swapped fixed rate municipals to floating, thus obtaining an attractive yield with reduced duration risk, and protecting Tangible Common Equity. Exploring risk/reward profiles of earning assets is nothing new to balance sheet managers, but the environment has certainly evolved since the start of 2020.

Managing excess liquidity while planning for interest rate risk management has also become slightly more complicated on the liability side. How does a bank choose from the various funding options and hedging strategies available? The decision-making process must take into account balance sheet composition (i.e. the availability of liabilities to hedge), impact to earnings and capital (in addition to liquidity) from the strategy, and practical applications, such as hedge accounting.

For accounting simplicity and hedging flexibility, it’s generally recommended to first evaluate liability hedges when attempting a shift in interest rate risk profile. In fact, many institutions took advantage of both spot-starting and forward-starting cash flow hedges over the past year. Forward-starting swaps on forecasted borrowings allow the bank to purchase longer duration assets today and know they will maintain the attractive spread in the future. For example, offerings like IntraFi Network’s (formerly Promontory Interfinancial Network) IntraFi Network Deposits give banks the ability to launch these funding contracts 6 months to 1 year in the future, while locking in their rate now to hedge against any increase in funding costs prior to launch date. This allows the bank maximum flexibility in planning its liquidity now and well into the future.

But what about banks flush with liquidity with no future funding needs anticipated? Part of the answer arose from a surprising place: dealing with yet another source of stress—the LIBOR transition. The FASB released ASC 848 Reference Rate Reform in March 2020 to address potential concerns about the impact of the upcoming LIBOR transition on hedge accounting. Although LIBOR fallback is expected at year-end 2021, guidance is applicable immediately to help users today explore potential alternative contracts and rates. The guidance allows for the swap to be amended, switching to a non-LIBOR benchmark. When combined with broadly-written hedge designation memos, banks can be proactive in dealing with LIBOR cessation and even potentially identify a new hedged exposure, if the hedge documentation allows for it. The bank can then modify the hedge to match the new (non-LIBOR) exposure, adjusting the fixed-rate or adding a floating rate spread to keep the transaction NPV-neutral. Finally, the bank can amend their hedging memo to reflect the new exposure, and the hedge relationship continues without de-designation.

There is a positive balance sheet strategy development that comes from this combination. By allowing banks to consider a change to a non-LIBOR hedged item, the strategy essentially provides added flexibility to banks that have implemented strategies using wholesale funding paired with swaps, a strategy that many banks smartly continue to explore. The strategy allows those banks to consider replacing the existing funding with other sources for cheaper and more customizable wholesale borrowings or even deposit products, without any impact to hedge accounting. These products allow a bank to replicate the details of the previous funding instruments, but at a considerably discounted cost. As a result of having written flexible hedge inception packages, banks can change the hedged exposure from wholesale funding to deposits without a re-designation event, allowing the bank to pay down wholesale borrowings. For those banks that now have many more deposits than when they first implemented the strategy, reducing their current need for wholesale funding, this is a welcome change in funding source that maintains the interest rate protection they continue to need.

This rule can be applied in a variety of different ways. Banks can make changes to the interest rate index, the spread to that index, the reset period, pay frequency, business day conventions, payment and reset dates, the strike price of an existing option, the repricing calculation, and may even add an interest rate cap or floor that is out-of-the-money on a spot basis. On the other hand, there are some aspects of the hedge that are unrelated to the reference rate reform: an institution cannot effect a change to the notional amount, maturity date, change from an interest rate to a stated fixed rate, or add a variable unrelated to LIBOR.

Ultimately, none of these options singlehandedly solve the problem of too much liquidity with too few safe places to deploy them, while earning an attractive yield and protecting against the eventuality of rising rates. Similar to life in 2020, the key is to deploy a variety of creative tactics to weather the storm and emerge a stronger institution.