Banks Feel the Heat

California Wildfires Force Financial Institutions to Initiate Emergency Response Plans
Banks Feel the Heat
UPDATED 10/31 -- For more than a week, wildfires ravaged Southern California, and financial institutions in the area were forced to temporarily close branches and initiate their emergency response plans.

The wildfires are slowing, and as firefighters work to extinguish the last of the fires, news has been positive from federal regulatory agencies regarding their institutions that were affected and their emergency response capabilities.

From the Office of Thrift Supervision, the number of OTS-supervised institutions affected by the California wildfires were under 10. (See related information: OTS Encourages Thrifts to Assist Customers Affected by Wildfires. OTS Director of IT Risk Management William Henley says seven OTS-regulated banks, “were in the line of fire, four were directly impacted and implemented their BCP (Business Continuity Plans), but sustained no real damage.”

“During that time none of these banks were off line or were unable to provide service to their customers,” Henley says.

Henley recommends other institutions start with the “Lessons Learned from Hurricane Katrina” as a starting point to review and update their business continuity plans.

As a regulator, Henley sees certain benefits of this sector being one of the most regulated. “These regulations do offer a value-added benefit,” he says. “Accompanying the regulations is the standardization of expectations of regulators and overall preparedness of the industry to recover from such disasters.”

Other federal banking regulatory bodies also responded quickly and offered relief to the banks and credit unions affected. To date:

- The Federal Deposit Insurance Corporation on Friday issued guidance to ease recovery for financial institutions affected by the wildfires.

- The National Credit Union Administration (NCUA) activated its disaster relief policy on October 24 to assist credit unions and their members affected by the wildfires.

- The Office of the Comptroller of the Currency also allowed institutions under its jurisdiction to close.

"Those numbers of 1 million evacuated are nearing what we saw with [Hurricane] Katrina," says OCC spokesperson Bryan Hubbard.

"The affected national banks numbered more than 100 branches and affiliates in the southern California area. Those branches have been closed or affected by the fires, including branches of Wachovia Bank, Bank of America, Union Bank of California, and Wells Fargo," Hubbard says. The Nation Credit Union Administration (NCUA) reported there were 52 credit unions in Southern California affected by the wildfires and evacuation orders.

There are community banks that have been affected, but have fewer branches, he says. "We know that the national banks in the local area have implemented their natural disaster emergency operation response plans," Hubbard adds. (See OCC Announcement: OCC Allows National Bank Offices Affected by Wildfires in Southern California to Close).

San Diego County Credit Union’s locations survived, says Ron Simmons, Security Systems Administrator at the credit union. "The fires did come a little close to our place, but we are safe," he says. "We were let back in this morning (Wednesday October 24), and in all it went well. All of our branches seem to be fine."

As of Thursday, fires burned in seven counties -- San Diego, Santa Barbara, Los Angeles, Orange, Riverside, San Bernardino and Ventura -- and states of emergency have been declared in those counties, according to California Fire departments. President George W. Bush has declared an emergency in the State of California and ordered federal aid to supplement state and local response efforts.

The NCUA under its emergency response directive will, where necessary, encourage credit unions to make loans with special terms and reduced documentation to affected members. The NCUA will also reschedule routine examinations of affected credit unions if needed.

The NCUA also will guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund and make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility. The statement from NCUA says its Region V (Western U.S.) examiners are in close contact with the affected local credit unions to offer advice and assistance. (Read NCUA Announcement: NCUA Activates Disaster Assistance in Response to California Wildfires).

Late on Thursday afternoon the NCUA issued another statement that the Southern California credit unions that had been affected by the wildfires, and most had resumed normal business. "Region V office examiners stationed in California have contacted all credit unions located in the fire damaged areas of Southern California," the statement says, "and at noon (Pacific time) [Thursday] most credit unions have returned to operations as normal."

The NCUA statement notes there are 52 credit unions located in Southern California affected by fires, and all are reported open, operating and serving their members. With no fire damage reported, 10 branch offices remain temporarily closed at sites hardest hit by fire.

How have the fires impacted your institution? Share your stories with editor Tom Field

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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