HOW DO YOU DEAL WITH THE COMPLIANCE FLOOD?

The Headache: At a recent gathering of community bankers, the issue of the seemingly unstoppable growth in compliance burden dominated discussion after discussion. Bankers shared some solutions they've devised. This is an area where the challenge always seems to outstrip the solution.

Our Question: What new ideas has your bank had for meeting the compliance challenge?

Come see what other bankers think, and add your own views

 

How can you cope with the compliance flood without breaking your budgets? 

Bankers have been up to their necks in red tape for years. In the aftermath of the financial crisis, the volume picked up further. And now the veritable tsunami of Dodd-Frank implementing rules promises full employment—and beyond—for the compliance fraternity for years.


Banks, especially community banks, don't have bottomless budgets. But we've heard of some innovative approaches that help.


Below is a sampling of what we've heard from community bankers. Add your own ideas and suggestions.

 
 Let's hear your views and ideas below! (Editorial Note: Contributions to Pass the Aspirin may also appear in our print edition. While we will ask for your e-mail address, this is only as an aid to verifying identity and will not be used for any marketing or promotional purpose. The e-mail address will not be published.)  

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Pedro Bryant, president and CEO, Metro Bank, Louisville, Ky. said:

We use a Compliance Committee approach that keeps up with issues across the whole spectrum that we have to watch. The committee gives me a monthly report on what's going on and what's coming up. Quarterly, the committee reports to our board.

To help us gauge compliance risk, we use an outside firm that conducts an annual compliance review. We also farm out Internal Audit to this firm. The company comes back three times a year to test our internal controls.

We try to prioritize, even within our committee approach. For instance, we make many business loans, so Regulation B can be a potential risk issue for us.

I find that this approach works well when you have a staff departure. When the compliance person leaves, for instance, you have a transition, rather than an abrupt break.

We're a smaller bank, and we were actually advised to take this committee approach by our federal examiners.
 
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August 05, 2011
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Gregg Vandaveer, president and CEO, Sooner State Bank, Tuttle, Okla. said:

Good compliance people are hard to come by, especially for community banks. I think part of the solution is to spread some parts of compliance around. For instance, community banks should start training tellers and other front-line employees to handle some of the basic compliance functions, beyond the ones they fulfill already.

By statute, a bank is required to have a designated compliance officer. We have one, who is our cashier. Reporting to the cashier are the heads of two major areas, Loans and Deposits. In addition to running these functions, they oversee compliance in their units' business activities. The cashier oversees their efforts.

However, as far as I'm concerned, with my bank taking this approach, ultimately, the buck stops here.

 Ultimately, I am the "designated compliance officer."

 
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August 05, 2011
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Paul J. Jarosz, CRCM, senior vice-president, and director of government compliance, Oxford Bank & Trust, Oak Brook, Ill. said:

Check with your regulator if they offer free training. I've had FDIC come out to do presentations to our Board (on Compliance Exams and I think CRA, if I recall correctly). I've also had reps from the FDIC and OCC come out to speak to the CRA group I chair. However, I think that they might be a bit overworked nowadays, so they might not have the time like they used to.

Some compliance cost-saving ideas:
* Sign up for emails from reputable companies and vendors. Don't forget your regulator also.

* Along similar lines, see if your data processor has some sort of compliance group. We're an FIS bank and they sponsor Compliance Users Group (CUG). They hold a monthly telemeeting on just compliance. (Free!) And they also hold quarterly users meetings (at a fee) that include compliance break-out sessions.

* Look for regional compliance networking groups. (I have to put in a plug for www.chicagolandcompliance.org.)

* For those lucky enough to still travel out of town for seminars (sigh.......) check if booking your airfare and hotel together in a package on one of the travel websites is cheaper than booking air and the seminar hotel discounted charge separately.

* Use FFIEC software for CRA and HMDA reporting, instead of using a vendor's software.

* If it's time to renew a vendor contract, ask for a reduction in the cost. It doesn't hurt to ask. I did that and knocked $500 off our web-based training contract.

* And if you are out of town, try to get a vendor to take you out for dinner. (LOL!)

 
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August 06, 2011
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Asaad A. Faquir said:

The key piece I think a lot of bankers and community bankers miss in all of this is the strategic aspect of compliance. For too long compliance has been a reactionary and secondary player within banking. A necessary evil. However with these changes (many of which we can see coming a mile a way) the time is now to begin include strategic intent into the Compliance mission. Maintainig the status quo and merely being reactionary will sink your bank and your budget.

As an example of being strategic with compliance, I am often asked to lend an opinion on a product or service while it is still "on the white board." Not just in terms of immediate risks or daily compliance, but if maintaining compliance on this product or service will be worthwhile. This helps to provide a more reality based ROA, ROE, ROI metric. In this way we are able to pursue products and services which are more likely to produce NET bottom line results.

Additionally I am involved in strategic conversations with our "silo" chiefs assesing the business benefits of products which I know tax my compliance resources. As I like to say I have a board mandate to keep the bank safe, and they have a mandate to make the bank money. The two are not mutually exclusive nor is one more important than the other. So by working together we can improve our existing products to make the bank money, while reducing the amount of effort needed to keep the bank safe, even as the "burden" of compliance increases.





 
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September 06, 2011
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Martin Hansen, president and CEO, First State Bank, Fairfax, Oklahoma said:

Obviously all banks are experiencing increased compliance costs. Not just additional costs associated with the regs themselves, but with the time investment by staff. In addition we all are charged with the issue of strategic planning and implementation of oversight and adherence within our institutions.

First State Bank is a small rural community bank. We are definitely constrained in this arena by just the manpower component.

Like many small community banks we have a compliance officer but she is like every other employee in the bank, they are required to "wear many hats" in the day-to-day operation of the bank. To alleviate the voluminous requirements of compliance we took the committee approach. The compliance officer is still in charge and manages and directs the efforts of her committee members. Each of those members are assigned an area of compliance responsibility, commensurate with expertise. They are responsible for researching, studying, and initiating discussion on new regs or changes within the committee. And they are expected to help the compliance officer in responding to and implementing the proper policy. The group meets regularly and this allows each member to use the other committee members as a "sounding board."

This approach has allowed us to utilize more man hours with less overall impact on any one individual. We consider it successful and support that with the positive regulatory response we have received.
 
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September 19, 2011
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Keith E. Pollek, president & CEO, Fox River State Bank, Burlington, Wis. said:

We have changed our philosophy in the compliance area. Whereas in the past we viewed it as something we had to do (not unlike eating your vegetables), we now look at compliance as something that is good for the customer and also good for us. So, we now build how we handle compliance matters into our processes, whether that be a new marketing initiative, something in the IT area, or social media. We want all of our customers to know that we are looking out for them and their best interests, just like a car dealer is emphasizing the safety features on a new car they are selling.
 
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September 19, 2011
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Blair Hillyer, chairman, president, and CEO, First National Bank, Dennison, Ohio said:

We have been prioritizing, devoting most of our resources to the riskier compliance areas: flood, BSA, high-priced mortgages, etc. We started this last year in anticipation of Dodd-Frank related rules. We have also spread some of the responsibilities for compliance among several employees, especially those employees most involved with that particular regulation. The bank is also looking at outsourcing more of the compliance function as our burden grows.
 
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September 19, 2011
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Daniel C. Yates, president & CEO, Brattleboro Savings & Loan, Brattleboro, Vt. said:


We developed a compliance program that, under the oversight of the Compliance Officer, delegates responsibility for review of the various regulations, and our compliance therewith, to a Management Compliance Committee. How this may change as more of the new regulations under Dodd-Frank roll out remains to be seen, but it has kept us from having to have more than one compliance officer.

The committee is made up of middle and senior managers from around the various functional areas of the bank. We provide training on the regulations and the program is written in such a way as to provide step-by-step instructions on what the responsible party is to review.

We have also developed a standard form of report that is completed detailing their findings. These reports are then submitted to the compliance officer who synthesizes them into a single report for discussion at a monthly meeting of the committee. That report also goes to our Board Compliance Committee for its review. The compliance officer tests his own sample, based on each committee member's sample, to ensure that the proper review is being completed and all findings identified. We also have an outside compliance consulting firm that performs an annual risk assessment and conducts independent reviews, the results of which are compared to the committee's work.
 
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September 19, 2011
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Frank Campbell, president & CEO, Pilgrim Bank, Cohasset, Mass. said:

When we implemented a compliance committee last year, the main purpose was to keep pace with all the new and revised regulations. It has become too burdensome for one person, and having more people involved will help make sure that we are addressing new compliance changes on a timely basis. However, we believe that controlling costs will be a secondary benefit, since we can now price implementation and track expenses as a group.
 
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September 19, 2011
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