lightning storm over city


Banking after Harvey and Irma

What has changed in the 12 years since Hurricane Katrina?

In the period leading up to the beginning of this year’s hurricane season, many meteorologists were predicting a greater number of storms compared with recent years.¹

September 13, 2017

A blog post by Jim Eckenrode, executive director, Deloitte Services LP

Certainly, with the horrible devastation wrought by Hurricanes Harvey and Irma, these predictions seem on point, if understated. And as I got real-time text updates from my brother and his family in Fort Myers, Florida, over the past weekend, I was personally connected to the implications of these forecasts. Our thoughts and best wishes are with all those impacted by these storms.

My colleagues (Sam Friedman and Howard Mills) have done an outstanding job covering the impacts of recent natural disasters on the insurance industry,2 but what about the impact on banking institutions serving individuals and businesses in the areas affected? And how might things have changed since 2005, when seven major hurricanes (including Katrina) contributed to the most active hurricane season on record to that point?

In the aftermath of Harvey, 39 counties in Texas are within the designated disaster area.3 This compares with 48 counties in the aftermath of Katrina. The Texas Department of Banking, however, expanded the area within which local banks were authorized to close branches to 54 counties.4 And that’s a big number: There are more than 200 banking institutions with a branch footprint in the 54 counties around Houston, representing almost $360 billion in deposits (as of June 30, 2016). For almost half of them—89 institutions in all—100 percent of their branches and deposits are in the affected area. Another 32 institutions have half or more of their deposits or branches in the area as well.5

As of September 12, southern Florida is now in recovery mode, and similar closings can reasonably be anticipated. Within just the three-county area around Miami (Palm Beach, Miami-Dade, and Broward Counties), there are more than 100 institutions with a total of over 1,800 branches and over $244 billion in deposits. More than 60 of them have all of their branches and deposits within the affected area.

Satellite image of a hurricane

After the storm

Turning to practical matters regarding storm impacts, people will need cash to live and to rebuild. With ATMs and branches flooded, even getting access to currency was very challenging in the aftermath of Katrina.6 Beyond that, proving account ownership and providing valid identification media for getting cash was, and still will be, a challenge for many. To help, the Federal Reserve has instructed banks in the affected area to accept nondocumentary proof of identity in line with Bank Secrecy Act provisions from individuals seeking to make withdrawals or cash checks for a short period of time.7 And many banks have announced fee waivers for out-of-network ATM usage as well as for late loan payments.8

With regard to bank lending, in some areas there won’t be homes to purchase or refinance, nor business operations to support new lending in the coming months as disaster recovery and rebuilding continues. A home equity line of credit could help address short-term cash flow issues—if there is still a house left.

There are also valuation challenges, as it will be hard to figure out what the short-term and long-term impact on values is. This could lead to a short-term sag in values. But in any case, an overall slowdown in mortgage lending activity is a likely outcome for some time to come. Auto lenders, too, are likely to be similarly affected by total collateral loss. But in terms of supplemental cash flow for hard-hit residents, in the short term, they may look to increased use of credit cards or even unsecured personal lines of credit.

And the banks themselves—or their third-party processors—will have a great amount of recovery work to do. Many lessons were learned in the aftermath of Katrina with regard to bank recovery from a natural disaster. Many banks had to institute manual procedures when their systems failed. Some banks were slower to recover as their backup sites were also located within the impact area, while other multi-bank servicers ran into capacity constraints as they attempted to get multiple institutions’ data and systems operational.9

With regard to bank lending, in some areas there won’t be homes to purchase or refinance, nor business operations to support new lending in the coming months as disaster recovery and rebuilding continues. A home equity line of credit could help address short-term cash flow issues—if there is still a house left.

The difficult task of recovery

But some things may not have changed. For example, while banks in the area all have surely activated backup operations and technology centers as part of business continuity planning, some of these centers may be difficult for employees to reach. Many of the branch staff and other individuals in the affected areas may be idle for a period of time until their work locations come back into service. And, of course, as residents, too, bank employees will be facing the same difficulties on the home front as their customers.

On the more positive side, access to banking services in some ways is easier now than in 2005. Continued growth in online banking services, combined with banking, investment, and payment apps on mobile devices that did not exist then, have the potential to address some of the basic needs that those in flooded areas did not have. And telecommunications infrastructure has also improved. Carriers have provided free access to local Wi-Fi hotspots during and immediately following the storm in both Houston10 and, now, in Florida.

Of course, all businesses in the areas affected by a natural disaster have similar and perhaps worse challenges in some ways than do banks. But because of depositary institutions’ role supporting commerce and providing essential payment and lending services that help residents rebuild, recovery becomes that much more of a difficult task.

We hope that our readers in the areas affected by Hurricanes Harvey and Irma make it through these natural disasters safely, and would welcome hearing about your experiences with your financial services providers in the wake of these two storms.

lightning storm over city

Michael Greshko, “Why This Hurricane Season Seems So Catastrophic,” National Geographic, September 6, 2017
Heather Timmons, “Why 85 percent of Houston homeowners have no flood insurance,” Quartz, August 29, 2017
Department Issues Updated Proclamation and Order Authorizing Temporary Branches Due to Hurricane Harvey, Texas Department of Banking press release, August 28, 2017
5Federal Deposit Insurance Corporation, custom Deposit Market Share Report, Deloitte Center for Financial Services analysis, accessed September 6, 2017
“Lessons Learned From Hurricane Katrina: Preparing Your Institution for a Catastrophic Event,” the Federal Deposit Insurance Corporation, Resources for Bank Officers & Directors, April 1, 2008
Regulatory Relief: Meeting the Financial Needs of Customers Affected by Hurricane Harvey and its Aftermath, Financial Institution Letter, Federal Deposit Insurance Corporation, August 29, 2017
Robert Barba, “In the path of Hurricane Harvey? Your bank may cut you a break,” Bankrate, August 29, 2017
Op. cit. FDIC Resources for Bank Officers
10 “More thank 53K Wi-Fi hotspots open around Houston during Hurricane Harvey,”, August 26, 2017


QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.

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