Social Media: The Good, the Bad and the Honest

The Federal Financial Institutions Examination Council (FFIEC) said upon its release of Social Media Guidance in December 2013, “the guidance does not impose any new requirements on financial institutions. Rather, it is intended to help financial institutions understand potential consumer compliance and legal risks, as well as related risks such as reputation and operational risks, associated with the use of social media, along with expectations for managing those risks.” The FFIEC also told us “…the Guidance is intended to help financial institutions understand and successfully manage risks in this area.”

The FFIEC guidance defines social media as “a form of interactive online communication in which users can generate and share content through text, images, audio, and/or video.” It also states that, “For purposes of this Guidance, messages sent via email or text message, standing alone, do not constitute social media.”

Bank examiners since at least 2010 have included in their exam questions pointed questions about bank use of social media. These include: do you offer and maintain a social media presence? If you do, describe the use of the presence and whether or not you’re using social media to promote products and services. And what are your controls, and, specifically, do you have policies and procedures?

Regulatory expectations are:

Social Media can be used for a number of things including marketing, incentives, applications for new products and services, public feedback, engaging prospective and existing clients, complaints, loan pricing, and deposit interest rates. You can also make good use of Social Media by using it as part of your complaint monitoring. There are some additional aspects of the Social Media Guidance you should be aware of:

In summary, if used appropriately Social Media can be an exciting tool that can yield immediate and measurable results. If it is not used properly and thoroughly monitored, however, it can result in serious reputational exposure accompanied by compliance, legal, and operational risks which need to be thoroughly documented at the outset.

Social Media is relatively new and its use is very fluid. What customers like and use today may not be ‘new enough’ for customers tomorrow.  It is critical to stay informed because there are still many unknowns. A decision to enter and/or stay in this aspect of customer communications should be well thought out and deliberate.

This article was written by Nanette Stanley.


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