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March 18, 2020

Stroock Commentary

By: K. Thomas Ko

On March 10, 2020, the New York Department of Financial Services (“DFS”) issued a number of releases including guidance letters and orders relating to the coronavirus, COVID-19, epidemic.  These releases mandate that regulated entities such as banks, insurance companies, foreign bank branches and regulated mortgage entities report their COVID-19 preparedness, relating to operational and financial risk, to the DFS no later than April 9, 2020.

This mandatory operational risk reporting includes many expected elements of an institution’s business continuity plans such as third-party vendor risk, but also includes pandemic-specific responses such as protection of employees.

The mandatory financial risk reporting includes many expected elements of any prudent financial risk mitigation plan. It includes assessments of customer credit risk ratings, credit exposure and assessments of the valuation of assets and investments as well as the overall impact on earnings, profits, capital, and liquidity.

However, the guidance also mandates consideration of how regulated financial institutions can take reasonable and prudent steps to assist those adversely impacted by COVID-19.  The potential steps suggest include offering payment accommodations, waiving overdraft fees, easing credit terms for new loans, waiving late fees for loan balances, and proactively reaching out to customers regarding available assistance.

Lastly, the issuances also granted relief permitting regulated entities affected by COVID-19 to temporarily relocate or close offices and branches and permit employees to work from remote locations such as personal residences.  The relief granted also permits 45-day extensions on certain regulatory filings to the DFS delayed by COVID-19.

The steps that the DFS has taken mirror similar efforts and exemptive relief and guidance issued by federal regulators and self-regulatory organizations.