For Compliance Sake
Andrews, William, Independent Banker
It wasn't long ago that compliance was considered a small part of an FDIC exam. But that was before FIRREA, FDICIA and a host of other banking regulations. Now the FDIC has a whole battery of examiners Just to look at compliance issues. A simple exam process that once took at most a few days can now take weeks.
"Community banks weren't doing it [compliance audits] themselves, so the regulators stepped in and said we'll do it for you," says Mary Ann Boda, compliance officer for the $150 million-asset Baraboo National Bank, Baraboo, Wisconsin. "We thought we could do it [compliance] when we had time, but no one ever seemed to be able to fit it in."
Community groups have also put extra emphasis on the exams and their findings, adding that much more pressure on examiners to closely scrutinize all financial institutions.
Just as the examinations are growing, so are the penalties. Monetary penalties are still rare, but the noncompliance findings mean more expenses because they result in more detailed paperwork and, possibly, higher FDIC insurance premiums.
"They usually home in on a certain thing and examine it to death:' Emily Dawsey says of compliance examiners. Dawsey is the vice president for compliance and loan review at the $101 million-asset First National Bank of Denham Springs, Louisiana. That bank underwent a safety and soundness exam in November. Compliance examiners were expected to follow closely behind.
Compliance was something a community banker used to do in his or her spare time, but that doesn't work any more, Dawsey says. Dawsey's entire work day is spent monitoring regulations and making sure that bank employees have all the necessary documents they need to fill out or hand out (as in the case of Truth-in-Savings).
The Need for Training
Community bankers are refocusing their efforts on being prepared for the growing responsibilities of compliance and the compliance exams.
They generally agree that constant and up-to-date training and education are key to good compliance. Many community bankers are getting additional training from a variety of sources, including a group of bankers who completed the IBAA's new compliance officer certification program last fall.
Completion of IBAA's four compliance workshops is required to attain certification. Bankers have four years to complete the certification program. Whether or not certification is achieved, bankers agree that the courses contain valuable information.
Many other compliance programs are geared for larger institutions and structure meetings around their desires and schedules rather than focusing in on the compliance issues faced by community bankers, says John Crawford, vice president of the $19 million-asset Gateway National Bank, St. Louis. Crawford has attended compliance training courses for each of the last three years, following poor examination findings.
Crawford attended the IBAA program because Gateway had received a "satisfactory" rating on its latest Community Reinvestment Act exam. Bank officials had expected an "outstanding" rating, so Crawford wanted to find out where the institution had fallen short.
CRA and fair lending are areas of compliance exams that tend to get much of the publicity, especially with the current rewriting of CRA rules. But those are by no means the only areas of growing compliance scrutiny, bankers say. Compliance exams and seminars generally cover lending, operations and deposits, while including a general overview of compliance matters. All are areas of increased scrutiny.
Examiners in flood-prone areas will also look closely at the institution's adherence to federal flood insurance rules, bankers say. Crawford adds that the Bank Secrecy Act is another area of growing concern among examiners.
The trick for community bankers, according to Crawford, is learning how to stay on top of compliance matters while maintaining a very limited staff. …