Making compliance exit exams as productive as possible
By Mary Thorson Wright
Exit meetings for compliance examinations can mark a critical turning point. First, examiners are preparing to leave the bank and could be less accessible to discuss what their reviews discovered, good or bad. Second, bank managers need to be clear about any issues that might require correction or enhancement. Preparation, participation and documentation maximize their value.
Which bank managers should attend exam exit meetings with regulators can vary, but there are common themes over how banks can make those meetings more productive. Have the right people there, and confirm a time for the meeting as soon as possible. One reason for that is to ensure more bank directors can attend.
“Each manager is responsible to obtain information from the examiners to address the findings in their areas,” says Richard Tripp, compliance officer for First Volunteer Bank in Chattanooga, Tenn. “Our goal is to accomplish that before the exit meeting, but, if not, it will be resolved at the exit.
“Usually the bank team will meet before the exit meeting to discuss findings and identify any questions we need to ask. If we are in disagreement with a finding, we will ask examiners for the regulatory cite, an explanation and any recommendations they have so we can respond appropriately.”
If communication is poor during an exam and at the exit meeting, it leaves bank management ill prepared to respond productively to any issues. It also opens the door for a regulator to file a Report of Examination that does not reflect the exit meeting discussion. “When we can communicate fully with the examination team, we get agreement about the issues,” offers David Hale, president of Tucumcari Federal Savings and Loan Association in Tucumcari, N.M. “We confirm the way forward and can address the issues more quickly and efficiently. Over time, that builds the relationship.”
For exit exams, it’s best that discussion items be committed to writing and the bank assign someone to take notes during the meeting. Particular care should be taken to document any comments and information that the examiners note will not be in their report.
After an exit meeting, a summary of the discussion and descriptions of the findings, action discussed and any timelines can be provided to managers to help them finalize their responses. “It’s important that the [examiner in charge] and the bank ‘sign off’ on the issues discussed, and that the ground rules are established for corrective measures and bank responses,” says Kris Welch, vice president with Chartwell Compliance, a regulatory consulting firm in Bethesda, Md. “If the bank doesn’t agree with the findings, it should provide documentation to support its interpretation.”
“When we can communicate fully with the examination team, we get agreement about the issues.”
—David Hale, Tucumcari Federal Savings and Loan Association
Be assertive about any corrective action taken during the course of the examination and its plan for further actions, suggests Debbie Meyers, senior consultant with Bank Strategies LLC in Denver and a former Federal Reserve Bank examiner. “Anything the bank has done to take corrective action during the examination should be presented to help mitigate the number and severity of comments that may appear in the report,” she says. “For issues that cannot be addressed that quickly, outline what the bank intends to do, including training or changes to policies, procedures, documents or systems. It’s important to have that understanding.”
Keep the atmosphere as positive as possible. If there are surprises or points of disagreement at the exit meeting or in the report, bank managers must ask questions and seek the facts or documentation that led to the conclusions. Evaluate the examination’s results carefully and “pick your battles carefully” when responding to exam assessments, advises Dave Nowling, senior consultant with Bank Strategies LLC and a former Federal Reserve examiner, “because the bank can make a lot of headway by addressing the lion’s share of issues and disputing only a minimal number of outliers.”
Tripp agrees that the atmosphere of exit meetings should be to discuss facts of findings in a mutually respectful way to keep the discussion open and productive. “The best advice I can give,” he adds, “is to approach the exit meeting as an opportunity to discuss and learn.”
Mary Thorson Wright, a former Federal Reserve managing examiner and compliance consultant, is a financial writer in Virginia.