In the Trenches

Three compliance captains report from the regulatory front lines

Compliance officers are the lieutenants rallying and leading the troops on the regulatory front lines, sometimes under direct fire. ICBA Independent Banker touched base with three successful compliance officers across the country to see how they and their community banks are doing. With persistent hard work, the answer is very well.

IB: Every community bank is different. How does your community bank operate to stay on top of compliance? What works well for your bank?

Charest: We are fortunate here at Kennebec Savings Bank in that our board of trustees and senior management are totally committed to compliance. Compliance isn’t pretty and it isn’t a money maker, but it is necessary. Having their commitment and support is critical to staying on top of compliance.

Also, communication. Involving compliance in the many areas of the bank (lenders’ meetings, marketing campaigns, operations meetings, etc.) has proven to be extremely helpful in ensuring regulatory compliance.

Ballard: Community bankers wear many hats, so to be effective we split deposit and lending compliance between two people. In essence, we have co-compliance officers. Compliance officers focus on their area of expertise, but at the same time they are familiar with the area that they are not hands-on with.

Worthy: My bank belongs to several compliance-oriented groups, and that is my suggestion for banks and compliance officers today. Our main group where we get a lot of our compliance information is actually a law firm with a group of attorneys dedicated strictly to banking, with a subset dedicated to regulatory compliance.

Aside from the firm’s auditors coming in to perform regulatory reviews, the group meets quarterly as a whole to learn of upcoming proposed rules, final rules, etc., and what a bank must do to keep up with the pace of change.

IB: You’re a successful compliance officer doing a challenging job well. What advice can you give to other compliance officers to keep a handle on their bank’s compliance?

Ballard: Don’t give up! Consistent training and reminders to your staff in an appropriate manner—you will eventually break through the barrier. Keep yourself informed! The board and/or senior management must support you and your education necessities.

ICBA’s compliance school and annual [conferences] are wonderful ways to learn what other banks are doing. The more ideas you gather, the more tools you have in your toolbox. Subscribe to as many regulator and association publications as possible and don’t rely on just one source for your information.

Worthy: Compliance changes are flying at banks and, more particularly, compliance officers, in rapid-fire succession.

Get informed any way possible. There are a great number of compliance resources at a compliance officer’s disposal. Read every day to stay abreast of the ever-changing regulatory environment.

Charest: First thing I would recommend is for every compliance officer to attend the ICBA Compliance Institute to obtain his or her Certified Community Bank Compliance Officer certification, which requires successfully completing a curriculum of more than 40 hours of instruction tailored specifically to community bank compliance officers. Regulators recognize the value of this certification program and appreciate the training it provides.

Secondly, create a compliance committee, and include senior management and department heads. Given the amount of regulatory change coming at us, communication between compliance, operations and senior management is critical. Work with operations to help create solutions; don’t just throw problems at them and expect them to resolve them without your help. Third, read. Read everything you can about upcoming regulations, reach out to department heads, and discuss how changes will impact their processes.

IB: How does your community bank manage and contain its compliance costs?

Charest: In today’s world you have to invest in technology that allows an institution to work smarter and more efficiently. It requires institutions to really look at processes and procedures to weed out the “well, we’ve always done it that way” processes. We’ve had great success here at Kennebec Savings Bank by asking and challenging our front-line employees to come up with ways to improve various processes.

Worthy: Compliance has long been considered a cost center for banks. It still is, but it is no longer considered the ‘necessary evil’ that it once was. Bank management has realized the importance of compliance management. I found that the best bang for the buck has been ongoing compliance training, including for ICBA’s compliance and Bank Secrecy Act institutes. We also encourage department managers to attend seminars that are sponsored by our state banking association.

Ballard: We try to do as much as we can ourselves without involving a vendor. For example, we print and mail privacy notices ourselves rather than using our deposit or loan vendors. We are able to monitor our Bank Secrecy Act requirements without a third party (so far anyway).

IB: If there is one realistic change regulators could make to ease your bank’s compliance challenges, what would it be?

Worthy: The regulatory examiners could perform some transaction testing and conduct interviews with bank personnel, in the presence of the compliance officer, of course. Also, in their pre-exam letter, examiners ask for so many documents, and then when they come into the bank they only use a small portion of that which they requested. If they requested only that which they are going to examine, it would save a lot of time for both the compliance officer and the examiner.

Charest: Just one? OK, to have the regulators truly accept that there is a difference between big banks and community banks and to consistently write regulatory controls with that in mind. As has been stated many times, community banks did not cause the problems, yet we are having to shoulder the consequences of others’ actions.

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