With customers and even regulators turning their heads and opening their ears to social media, your community bank’s participation in the conversation should be a matter of when, not if
By Collin Canright
Your community bank may not be into social media just yet. But your customers certainly are. And now, even the regulators are interested—and voicing their concerns about it.
Although many community banks have yet to engage directly in the various social media channels, under proposed guidance issued for comment by the Federal Financial Institutions Examination Council, all banks will need to monitor social media for any potential risks. A formal indication of regulators’ recognition of the importance of social media, the FFIEC’s guidance addresses legal, compliance, operational and reputational risks. Of those risks, the agency guidelines emphasize reputational risks of social media as the most potentially significant for banks.
It’s a social world
Increasingly, consumers are posting comments, reviews and complaints about community banks on popular social media, blogs and review sites like Yelp, Twitter and Facebook. “Banks may feel they can comply with the guidance by opting out of social media or by not marketing products,” says Cary Whaley, ICBA’s vice president, payments and technology policy. “There are still reputational risks to monitor.”
“Even if you are not involved in social media, you still need to be ready to respond,” echoes Courtney S. Stolz, an attorney with the law firm Bryan Cave LLP in Washington, D.C.
Community banks are just beginning to use social media channels as a means of gaining visibility and communicating with current and potential customers. Only 30 percent of community banks use social media channels to communicate with their customers, according to the ICBA 2012 Community Bank Technology Survey. Of the community banks surveyed that had used social media, 99 percent were posting on Facebook, 31 percent were chirping away through Twitter and 21 percent were networking using LinkedIn.
Community banks primarily use social media to embellish their brand and continue communication within their communities, rather than to advertise loan rates or products, says Chris Lorence, ICBA’s chief marketing officer and executive vice president. “Social media has been gaining popularity and clout not only amongst the millennials, but across all age groups,” Lorence says. “Social media is now a major ‘influencer’ in consumer decisions, and positive or negative reviews in the space can go a long way in benefiting or hurting any business, including a community bank.”
Most community banks’ posts on Facebook are designed to engage community members in dialog with questions, community announcements, bank event notices or occasionally even job notices. More and more, community banks are seeing the need to look beyond their existing customer base and engage future customers using these communications methods. A few large banks, in contrast, use Twitter as a customer service vehicle.
Initially, Honor Bank in Traverse City, Mich., decided to go slow in engaging in social media, staying away from advertising or product promotions when it set up a Facebook page a few years ago, says Norman Plumstead, the bank’s first vice president and marketplace branch manager. “We considered it was a risk because there is not a lot of guidance. We just want to know what the playing field is, so we can play within it.”
About a year and a half ago, after deciding not to continue to wait for regulators, the $190 million-asset community bank formalized its social media use. “We adopted a social media policy and do our best to follow that policy,” Plumstead says. “It seems like [the FFIEC] is codifying a lot of the best practices that we picked up on from conferences and industry groups.”
Thomas X. Geisel, president and CEO of Sun National Bank, a $3.2 billion-asset community bank in Vineland, N.J., agrees. Sun National, which operates 70 branches, had been developing its own social media policy and procedures well before the FFIEC’s guidance. “The fact that the FFIEC is developing parameters around social media only provides validity to the importance of it as a primary stakeholder communication channel,” he says.
Sun National maintains a Facebook page, and Geisel uses Twitter for various public communications as the bank’s chief executive. In a LinkedIn email in response to an inquiry on Twitter, Geisel wrote, “We’ve embraced social media as an important means of expanding our accessibility.”
The FFIEC has defined social media broadly, to encompass nearly any online or interactive communication with any consumer. The joint-agency guidance is also quite specific in its expectations that a bank’s board of directors and senior management must monitor social media activity, whether their institutions engage in those channels or not.
Monitoring social media and reporting effectiveness and compliance to management is an especially important part of the FFIEC’s guidance. “The FFIEC wants a procedure for measuring the effectiveness of social media,” Stolz says. “They want [banks] to have some kind of escalation procedure in place, so that if something is not working, management addresses it.”
As a result, any bank’s social media policy must be specifically tailored to the institution, its management structure and its operating procedures—not a difficult task, but an exercise that takes conscientiousness. “Don’t just pull something off the shelf,” Stolz advises. “Tailor it to your institution’s management, operating and reporting procedures.”
Collin Canright is a financial writer in Chicago.