Magazine article Independent Banker

In the Feedback Loop

Magazine article Independent Banker

In the Feedback Loop

Article excerpt

Each year, the Conference of State Bank Supervisors and the Federal Reserve host the Community Banking in the 21st Century Research and Policy Conference. Now in its third year, this past September the conference brought together community bankers, academics, policymakers and bank supervisors to discuss the latest academic research on community banking.

An important component of the conference is the direct input community bankers provide. To gather research for this year's fall conference, state regulators in 27 states held town hall meetings with community bankers. In addition, the CSBS and the Federal Reserve conducted a survey of nearly 1,000 community bankers. The town hall meetings provide a broad picture of the unique opportunities and challenges facing community banks, all while accounting for the vibrancy and diversity that exists nationwide in our financial system.

A few common themes emerged from last year's town hall meetings. For instance, a lack of clear regulatory expectations and perceived aggressive examination tactics have led many community banks to hire more compliance personnel and third-party auditors, both of which are in high demand and very expensive. Some community banks have abandoned certain financial products because of higher compliance costs, forcing consumers to consider other nonbank financial service providers.

As one community banker put it at a town hall meeting in Massachusetts, "When developing a new product, the first question should not be 'What will the regulators think?' It should be 'How many people can we help?'"

The CSBS and Federal Reserve survey adds measurable data to the various observations at the town hall meetings. Respondents to the 2015 survey reported that regulatory compliance accounted for 11 percent of personnel expenses, 20 percent of legal expenses and 48 percent of accounting expenses. …

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