Legal Alert

NYDFS Requires Filing of Preparedness Plans and Financial Risk Assessments Related to COVID-19

March 16, 2020

In an Industry Letter, the New York State Department of Financial Services (NYDFS) is requesting assurance that New York State regulated institutions have preparedness plans in place to address operational risk, and it is requiring each regulated institution to respond within 30 day of March 10, 2020.

The Industry Letter provides that an institution’s preparedness plan should be sufficiently flexible to effectively address a range of possible effects that could result from an outbreak of COVID-19 and reflect the institution’s size, complexity, and activities. 

The Industry Letter sets forth the following nine specific elements that the plan should cover:

  1. Preventative measures tailored to the institution’s specific profile and operations to mitigate the risk of operational disruption, which should include identifying the impact on customers and counterparts
  2. A documented strategy addressing the impact of the outbreak in stages, so that the institution’s efforts can be appropriately scaled, consistent with the effects of a particular stage of the outbreak, which includes an assessment of how quickly measures could be adopted and how long operations could be sustained under different stages of the outbreak
  3. Assessment of all facilities (including alternative or back-up sites), systems, policies, and procedures necessary to continue critical operations and services if members of the staff are unavailable for long periods or are working off-site, including an assessment and testing as to whether large-scale, off-site working arrangements can be activated and maintained to ensure operational continuity. This also would include an assessment and testing of the capacity of the existing information technology and systems in light of a potential increased remote usage
  4. assessment of potential increased cyber-attacks and fraud
  5. Employee protection strategies critical to sustaining an adequate workforce during the outbreak, including employee awareness and steps employees can take to reduce the likelihood of contracting COVID-19. See New York State Department of Health website: and CDC Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease 2019:;
  6. Assessment of the preparedness of critical outside-party service providers and suppliers
  7. Development of a communication plan to effectively communicate with customers, counterparties, and the public and to deliver important news and instructions to employees, along with establishing forums for questions to be asked and addressed
  8. Testing the plan to ensure the plan policies, processes, and procedures are effective
  9. Governance and oversight of the plan, including identifying the critical members of a response team to ensure ongoing review and updates to the plan, including the tracking of relevant information from government sources and the institution’s own monitoring program

In a separate Industry Letter, the NYDFS is requesting assurance from New York State regulated institutions that the institutions are identifying, monitoring, and managing the potential financial risk arising from the spread of COVID-19. The NYDFS is requiring that New York State regulated institutions submit a plan to manage financial risk arising from COVID-19 within 30 days of March 10, 2020.

The plan, at a minimum, should include the following assessments:

  1. Assessment of the credit risk ratings of the customers, counterparties, and business sectors impacted by COVID-19
  2. Assessment of the credit exposure to customers, counterparties, and business sectors impacted by COVID-19 arising from lending, trading, investing, hedging, and other financial transactions, including any credit modifications, extensions, and restructurings (including capitalizations of interest)
  3. Assessment of the scope and the size of credits adversely impacted by COVID-19 that currently are in, or potentially may move to, non-performing/delinquent status, including consideration of stress testing and/or sensitivity analysis of loan portfolios and the adequacy of loan loss reserves
  4. Assessment of the valuation of assets and investments that may be, or have been, impacted by COVID-19 
  5. Assessment of the overall impact of COVID-19 on earnings, profits, capital, and liquidity (including impact on loan-to-deposit ratio) of your institutions
  6. Assessment of reasonable and prudent steps to assist those adversely impacted by COVID-19.  See DFS Guidance to New York State Regulated Banks, Credit Unions and Licensed Lenders Regarding Support for Businesses Impacted by the Novel Coronavirus (these steps may 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 and those adversely impacted via app announcements, text, email, or otherwise to explain the above-listed and any other assistance being offered to them).

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(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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