New Social Media Guidelines Proposed for Banks and Credit Unions

Posted on January 31, 2013

Last week I was informed that new social media guidelines were proposed for banks and credit unions by the Federal Financial Institutions Examination Council. (The FFIEC supervises and writes policies and standards for financial institutions in the U.S.). While the FFIEC has been pretty silent on social media governance in general, their silence (probably intentionally) haunted marketing, compliance and legal departments. Most financial institutions (FIs) have been operating under the assumption that they can’t be penalized for using social media since it hadn’t been regulated yet. The key word there was “yet”; it was bound to happen sooner rather than later.

There is a regulation for everything in the financial world, thousands upon thousands of them. I literally walk Mission Impossible-style through the red tape on my way up to my desk every day. So, naturally, marketing departments have been skeptical about what they can and can’t do since any kind of direction from the FFIEC has been null. Because of this, some financial institutions, such as Chase, have been left to sit on the fence for years about whether they should even enter the space.

Well, the time has finally come. This week, the FFIEC dropped their proposed guidelines on social media usage for banks and credit unions, somewhat of a light read at 31 pages deep. The document outlines the potential consumer compliance, legal, privacy, reputational and operational risks associated with social media, along with guidelines for how those risks should be managed. Here are some of the highlights:

  • The guidelines state that FIs are now required to develop a social media strategy defining clear roles of ownership over social media management responsibilities. Additionally, the policy should outline how social media usage will contribute to the overall strategic goals of the institution, how risks will be managed and controls set in place. Kudos, I’m good with this. That actually scares me that there are businesses out there that haven’t thought this through by now.
  • Employee training programs must be established to educate and inform employees about social media usage relating to the financial institution. This includes providing specific examples of acceptable usage, policies on usage during work hours, etc. Props on this one, too. It’s important to give all employees the opportunity to get on board and if possible, involved in the process. That goes for any industry, not just finance. Just know that you cannot tell an employee what they can and can’t post on their social media sites. That’s pretty much illegal.
  • ROI will now have to be reported to the institution’s board of directors. Reports must detail the institution’s social media program’s success in terms of meeting intended objectives. This is a no-brainer. ROI should be accounted for; however, with all the red tape in this industry I’m having a difficult time seeing how this will be reported on effectively and consistently. Without further guidance and explanation from the FFIEC on ROI, I think this will make many FIs drop their social presence entirely. Perhaps the men and women of the FFIEC should familiarize themselves with Olivier Blanchard’s Social Media ROI.
  • Audits must be conducted to ensure compliance with all policies, laws and regulations regarding social media usage. Erm. Really? This is where I think the FFIEC begins to fall out of touch with the nature of social media. Being able to audit every digital move an FI makes will require a significant investment in third party vendor systems. Additionally, it will make any effort in using social media as a communication tool not worth the hassle of having to making sure every post, response, picture, etc is in compliance.

These are only a fraction of the guidelines proposed. FIs have put a ton of resources into getting people to even think about interacting with their banks and credit unions on social media. It’s a tough sell. Then, in barges a group of out of touch regulators trying to put controls on how institutions manage their social media programs. I’ll save you the trouble of calculating your ROI−there won’t be any because followers are going to leave in droves if they start seeing disclosures and FDIC/NCUA logos in their News Feed.

Most of these guidelines won’t have a huge effect on how the majority of banks and credit unions use social media. In fact, the guidelines may help clean up some of the irrelevant garbage that’s being put out there by making strategy alignment mandatory for both campaign-focused and regular content. However, seeing that 1 in 14 banks and credit unions will abandon their social media programs in 2013−I do expect that number to meet or exceed that outlook.

These guidelines will reduce innovative long-term development of social media programs like that of ASB and NAB banks in New Zealand and Australia respectively. ASB developed a social teller chat system for customers, creating the first “virtual branch” of its kind. NAB recently developed the financial industry’s largest social command center, allowing it to quickly respond to customers and identify opportunities based on the pulse of the conversations being had on Twitter and Facebook. These are the kinds of creative, forward-thinking concepts that American banks and credit unions will be shunned from developing due to the excessive compliance hoop-jumping that will be required thereafter.

FFIEC has shown that a widespread misunderstanding exists on how to create long-term programs in social media and that there is no hope in sight for some years to come.

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