Operational Outlook

By Hoffman, Karen Epper | Independent Banker, October 2016 | Go to article overview

Operational Outlook


Hoffman, Karen Epper, Independent Banker


Complying with regulations is more than just an everyday task for community banks. It has become a full-fledged strategic issue-an all-important ingredient in how a bank can operate efficiently, grow its bottom line, and develop innovative products and services.

"Strategic planning has been the focus of the regulators for several years now, and regulation and compliance is an integral part of that strategic planning," says Cathy Ghiglieri, president of Austin, Texas-based consultancy Ghiglieri & Co.

Charlie R. Cameron, principal in the financial institutions group at the consulting firm CliftonLarsonAllen LLP, says compliance has become more of a strategic issue for community banks in recent years for several reasons, ranging from an industrywide shortage of personnel with strong compliance backgrounds to the impact of new regulations on introducing or expanding key product lines (such as a home equity line of credit). They also include the potential negative impact noncompliance can have to stymie strategic growth initiatives, such as introducing new products, opening new branches or engaging in acquisitions.

As Jim Adkins, managing partner for the regulatory consulting firm Artisan Advisors LLC of Barrington, Ill., points out, "Any time regulators see a bank going into a new market or offering a new product, they are going to be concerned that you know what you're doing from a compliance and risk standpoint."

Planning for compliance

New legislation, regulations and compliance in general are receiving increased attention as banks consider their strategic initiatives in the areas of growth, profitability improvement and possible market expansion, Cameron points out. For example, when it comes to organic growth, he says the regulatory burden of compliance is impacting the processes and speed of rollout of new initiatives. Similarly, the application of fair lending laws and Community Reinvestment Act compliance issues in recent years could delay a community bank's market expansion plans or deny them altogether.

"If you're dealing with all that [regulatory burden and complexity], it forces you to take your eye offthe ball, and it takes away from your ability to focus on running the bank," says Jim Kleinfelter, former president of the consulting firm Young & Associates in Kent, Ohio, and now president and CEO of Geauga Savings Bank in Newbury, Ohio.

In light of a host of new and increasingly complex compliance rules, community banks need to be much more cognizant of regulations that hinder their growth and broader goals, says Ann M. …

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