Smaller Banks Hiring Chief Risk Officers

By Keenan, Charles | American Banker, March 7, 2006 | Go to article overview

Smaller Banks Hiring Chief Risk Officers


Keenan, Charles, American Banker


Pennsylvania Commerce Bancorp. of Camp Hill has plenty to cheer about. Over the last five years, its assets have nearly tripled, to about $1.6 billion, profits have increased an average of 19% a year, and its stock price has risen by an average of 23% a year.

But as it has grown - adding employees, branches, and lines of business - Pennsylvania Commerce, the parent of Commerce Bank Harrisburg, has also become more complex and taken on more risk.

To help manage it, the company created a new job, chief risk officer, in late 2004. The idea was to make one person accountable for all facets of risk - credit, rate, strategic, compliance, transaction, price, reputational, and liquidity - and empowered to enforce new controls and procedures.

The risk officer, D. Scott Huggins, reports to chairman and chief executive officer Gary L. Nalbandian. "We wanted to coordinate the key areas for risk mitigation," Mr. Nalbandian said. "Our main focus is to be in business to provide returns for our stockholders by having growth. But if we are stymied by the risk function, it puts our whole growth program behind."

New regulations applied in recent years because of laws such as the Sarbanes-Oxley Act and USA Patriot Act have been upping the ante in compliance for smaller institutions. Only big banking companies used to have chief risk officers, but regulators are pushing community banks, especially fast-growing ones, to appoint them.

Recent mishaps over issues ranging from money laundering to privacy have also made having a chief risk officer more important, said Thomas Vartanian, a partner at Fried, Frank, Harris, Shriver & Jacobson in Washington.

"As the number of institutions that get into trouble increase, resources are being put in the direction of where that trouble comes from," Mr. Vartanian said. "Compliance has become too high-stakes a game not to have someone in the front office full-time reporting to the board of directors."

Community banks have always monitored different kinds of risk, but with a silo mentality, said William Perotti, a former regulator and former Risk Management Association chairman who is now the chief risk officer for Frost Bank in San Antonio. Credit risk used to be handled by someone in the lending division, rate and portfolio risk by someone in the capital markets unit, he said - but these people did not report to someone overseeing all risk.

"The chief risk officer can present an objective viewpoint to each division," offer guidance, "and be someone to bounce ideas off," Mr. Perotti said.

The caliber of people that community banks are hiring shows they consider the job important. One Florida banking company recently named a former bank president as its top risk officer. Commerce's Mr. Huggins has 34 years of risk- management experience; his recent appointment to the upper-level management team illustrates the growing influence of chief risk officers in executive suites and boardrooms.

Richard Riese, the director of the American Bankers Association's Center for Regulatory Compliance, said the risk function has become more important in recent years as banks have added more sophisticated products and services, such as discount brokerage, investment banking, and trust services.

"You have to have an appreciation for all of the spinoff hazards that attach to any kind of business decision in today's financial institution marketplace," Mr. Riese said. "They need to have somebody watching those kinds of risks."

Mr. Perotti said the concept of centralized risk management "is really moving downstream for community banks." He said he had received four calls in 90 days from bank CEOs interested in learning more about hiring a chief risk officer. Each of their banks had about $1 billion of assets.

Some bankers and other experts say banks that size should have one. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Smaller Banks Hiring Chief Risk Officers
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.