Great Starts


Getting the most from exam kickoff meetings

By Mary Wright Thorson

Bobby Unser, American race car driver and three-time winner of the Indianapolis 500, could have been talking about bank examinations when he said: “Success is where preparation and opportunity meet.”

Examination mechanics are well known and generally standard: Regulators send a preparatory “first day” letter, the bank gathers information, and examiners evaluate the data submitted to assess the bank’s recent compliance activities.

Comprehensive and well-organized responses to regulatory requests help to move the examination along smoothly, but banks also can benefit from providing information not specifically requested that they know to be relevant.

So why do some community banks enjoy a more fruitful examination experience than others? The answer may be found in best practices that some of them follow.

Setting the stage

The examination kickoff meeting offers a venue to proactively present a picture of a bank, including its changes to the team, operations or systems; a rundown of activities that are underway; and highlights of accomplishments. Bank management should ask when examiners expect to have the exit meeting to facilitate attendance by outside directors, and assess the disposition of the examiners and detect changes in their approach or sensitivity to specific issues.

Richard Tripp, compliance officer at First Volunteer Bank in Chattanooga, Tenn., makes it a point to communicate periodically with regulators between examinations. “It allows our management team to break the ice with the examiners, put a face with a name, and get a feel for the examiner’s personality and examination philosophy,” he says.

Kris Welch, vice president with Chartwell Compliance, a regulatory consulting firm in Bethesda, Md., points to some fundamental steps to examination management. Community banks should introduce their team members—including cyber­security and chief technology officers and general counsel—to examiners as well as identify a primary contact person, she says. She also recommends requesting periodic status meetings with examiners during a review.

At First Volunteer Bank, the bank’s president and chief credit officer usually request to have a daily meeting with the examiner-in-charge to stay up-to-date daily on any issues. At Tucumcari Federal Savings and Loan Association in Tucumcari, N.M., however, those meetings with examiners take place but are less structured because of the bank’s small staff (usually there are as many examiners in the bank as staff members), says David Hale, the bank’s president.

“Put some shape around things the bank has been doing, show attentiveness to issues, and set the stage.”
—Debbie Meyers, Regulatory Consultant

If a bank has discovered any potential regulatory issues on its own, how those issues were discovered and what has been done to address them should be explained upfront with examiners, consultants say. Dave Nowling, senior consultant with Bank Strategies LLC consulting firm in Denver and a former Federal Reserve Bank managing examiner, believes a proactive presentation engages the examination team.

“It changes the dynamic between the bank and examiners,” he says, “from one of ‘discovery and gotcha’ to ‘how can we make this better as we move forward.’”

Doing self-assessments

Community banks should perform a self-assessment to prepare for the kickoff, adds Debbie Meyers, senior consultant with Bank Strategies LLC and a former Federal Reserve Bank examiner. She says that review results that are based on current regulatory expectations, hot buttons, and new or changed laws or regulations help the bank create a level set to go into the exam kickoff meeting.

“Bankers and directors should also confer and prepare the message they want to share with the examination team when they come in the door,” Meyers says. “Put some shape around things the bank has been doing, show attentiveness to issues, and set the stage.”

Meyers also emphasizes that senor bank managers should set the tone to ensure the bank’s employees respond constructively to examiners and share the bank’s activities. Hale believes the best kick-off meeting preparation requires understanding well beforehand what regulators want to learn during their exams.

“For virtually everything we do, every decision we make between examinations, we consider the regulatory impact based on our regulator’s expectations,” Hale says. “At the kickoff, we are attuned to our regulators and use the meeting to become more knowledgeable about how to respond to them in a robust manner.”

Mary Thorson Wright, a former Federal Reserve managing examiner and compliance consultant, is a financial writer in Virginia.