Proposed Federal Cybersecurity Regulations for Financial Institutions Face an Uncertain Future

From: The National Law Journal

ARTICLE BY Joseph Facciponti Ruth Merisier Joseph V. Moreno | Cadwalader, Wickersham & Taft LLP

Last year’s proposed comprehensive framework for cybersecurity rules for large financial institutions is suddenly facing an uncertain future.1With the comment period having closed as of February 2017, the framework was facing criticism as unnecessary for an industry already subject to a host of federal, state, and international cybersecurity regimes. That criticism – now coupled with the Trump Administration’s general retreat from regulatory rulemaking across the board – may result in cybersecurity rules that are ultimately more limited in scope than originally envisioned, or lead to the proposed framework being abandoned altogether. In the meantime, large banks and other financial institutions must continue to comply with existing cybersecurity rules under the ever-growing scrutiny of regulators both in the United States and overseas.

I. Overview of the Proposed Framework

On October 19, 2016, three federal banking regulators – the Federal Reserve Bank (“FRB”), the Office of the Comptroller of the Currency (“OCC”), and the Federal Deposit Insurance Corporation (“FDIC”) – issued an advance notice of proposed rulemaking for new cybersecurity regulations for large financial institutions (i.e., institutions with consolidated assets of $50 billion) and critical financial infrastructure.2  The framework was intended to result in rules to address the type of serious “cyber incident or failure” that could “impact the safety and soundness” of not just the financial institution that is the victim of a cyberattack, but the soundness of the financial system and markets overall. Accordingly, the framework envisioned “enhanced standards for the largest and most interconnected entities… as well as for services that these entities receive from third parties.”3

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