Pub. 5 2016 Issue 2

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 18 M ore government regulation. More risk. More cost. Every day, bankers are faced with these challenges, and information technology is an increasingly important example. To manage IT internally, bankers often are forced to spend too much time solving problems. At the same time, a successful banker is always strongly motivated to focus more time outwardly — meeting customers’ needs, achieving strategic objectives and growing the bank. Today, more bankers are choosing to utilize cloud computing for IT network systems and support, in contrast to previous in-house hosting and support, because doing so allows them to reduce risk, control costs and more efficiently focus on achieving the strategic goals they have for their banks. Regulators in many cases encourage outsourcing, particularly when a bank can obtain more comprehensive services than it can provide on its own. Comptroller of the Currency, Thomas Curry, who has been especially vocal about information security risks facing the banking industry, has stated regarding cybersecurity, “Third-party service providers are important to all financial institutions, but they can be especially important to community banks.” He added, “[C]ommunity banks in particular often use outside contractors to leverage expertise and resources that they can’t support internally” — although, at the same time, a bank must maintain proper supervision of the vendor’s activities. Abundant regulatory guidance has been issued concerning vendor due diligence. Considering these guidelines and seeking out vendors that are familiar with and exclusively dedicated to serving the banking industry can help to ensure CLOUD COMPUTING & THE REGULATORS that bankers not only make a good initial vendor selection but also perform appropriate ongoing vendor due diligence that will satisfy regulators. The FFIEC’s Outsourcing Technology Services Booklet i , which is part of the FFIEC’s IT Examination Handbook, states “Outsourcing of technology-related services may improve quality, reduce costs, strengthen controls and achieve any of the [following] objectives”: • Gain operational or financial efficiencies • Increase management focus on core business functions • Refocus limited internal resources on core functions • Obtain specialized expertise • Increase availability of services • Accelerate delivery of products or services through new delivery channels • Increase ability to acquire and support current technology and avoid obsolescence and • Conserve capital for other business ventures Cloud computing provides banks the information technology resources that they need without having to buy the individual components and hire the people who can assemble all of those components and keep them running securely, reliably and efficiently. Choosing a cloud computing partner that works only with banks; that has appropriate risk-management processes, audits and regulatory exams; and that has substantial industry experience and knowledge, can add up to a very well- informed decision for your bank. About the author: Charles Cheatham is senior vice president and general counsel at BankOnIT. He has more than 30 years of experience providing legal services and advice to bankers. Prior to joining BankOnIT, he served as vice president and general counsel of the Oklahoma Bankers Association and was previously a partner at McAfee & Taft, the largest law firm in Oklahoma. Charles is a graduate of Harvard Law School. For more information, visit www.bankonitusa.com , or contact solutions@bankonitusa.com i http://ithandbook.ffiec.gov/it-booklets/outsourcing-technology- services/introduction.aspx By Charles Cheatham, BankOnIT SVP & General Counsel PUTING By Charles Cheatham, BankOnIT SVP &General Counsel