New York Department of Financial Services Issues Guidance on COVID-19

The New York Department of Financial Services (the Department) recently released guidance addressing the impact of the Novel Coronavirus (COVID-19).  The guidance includes the following three industry letters: (i) guidance to New York State regulated institutions with a request for assurance relating to potential financial risk arising from the outbreak of COVID-19 (Financial Risk Plan Guidance); (ii) guidance to New York State regulated institutions on operational risk arising from the outbreak of COVID-19 (Operational Risk Plan Guidance); and (iii) guidance to New York State regulated banks, credit unions and licensed lenders regarding support for businesses impacted by COVID-19 (Business Assistance Guidance).

Pursuant to the Financial Risk Plan Guidance, each regulated institution must submit, no later than April 10, 2020, a response to the Department describing the institution’s plan to manage the potential financial risk that could arise from the COVID-19 outbreak.  The plan, at a minimum, must include assessments of: (i) the credit risk ratings of the customers, counterparties, and business sectors impacted by COVID-19; (ii) the credit exposure to customers, counterparties, and businesses impacted by COVID-19; (iii) the scope and size of credits adversely impacted by COVID-19 that are currently in or potentially may move to delinquent status; (iv) the valuation of assets and investments that may be or have been impacted by COVID-19; (v) the overall impact that COVID-19 has had on earnings, profits, capital, and liquidity of the institution; and (vi) the reasonable steps to assist those adversely impacted by COVID-19.

Additionally, the Operational Risk Plan Guidance provides that each regulated institution must submit, no later than April 10, 2020, a response to the Department describing the institution’s plan to manage the risk of disruption to operations and services.  The plan must, at a minimum, include the following: (i) preventative measures tailored to the institution’s profile and operations to mitigate risk of operational disruption; (ii) a strategy addressing the impact of the outbreak in stages, so the institution’s efforts can be appropriately scaled, consistent with the effects of a particular stage of the outbreak; (iii) an assessment of all facilities, systems, and policies and procedures critical to continuing essential operations and services in the event that staff members are unavailable for long periods of time or working off-site; (iv) an assessment of potential cyber-attacks and fraud; (v) employee protection strategies to sustain an adequate workforce during the outbreak; (vi) an assessment of the preparedness of essential third-party service providers and suppliers; (vii) a communication plan to enable effective communication with customers, counterparties, the public, and employees; (viii) testing of the plan to ensure it is effective; and (ix) governance and oversight of the plan to ensure ongoing review and updates to the plan.

Further, the Department’s Business Assistance Guidance urges regulated banks, credit unions, and licensed lenders to consider the following steps to assist businesses that have been adversely impacted by COVID-19:

• Offering payment accommodations (e.g., allowing borrowers to defer payments, extending payment due dates, or otherwise adjusting terms of existing loans);
• Waiving overdraft fees;
• Easing credit terms;
• Waiving late fees; and
• Proactively communicating with customers and those adversely impacted to explain the assistance being offered.