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May 2013
13
Bank
notes
Community Bankers Association of Illinois
H
ow can we stop the
bleeding? It’s a question
banks have been asking
themselves for years as the
cost of regulatory compliance erodes
margins, eats away at valuable resources
and threatens the overall health of the
community banking industry.
In 2010, Deloitte determined that the
cost to manage compliance was growing
at a rate of 15 percent each year. Keep
in mind this estimation is conservative
at best, as it doesn’t reflect the full cost
implications driven by the Dodd-Frank
Act. But, even more alarming than the
costs is the fact that most community
banks have done little to change how
they manage compliance. It’s still a
highly manual process relegated to a
select few within the organization.
The challenges of compliance predate
Dodd-Frank, and the painful truth is
that many banks are still failing to meet
decades-old compliance requirements.
As a result, examiners are coming down
hard on community banks that are
unable to demonstrate a well-defined
compliance program – one that can
accurately identify, manage, monitor
and control risk across the institution.
Too often these banks lack the systems
and resources to meet this tall order.
If community banks expect to conquer
the massive complexities of today’s
regulatory environment, while also
tackling other market pressures facing
their businesses, they must re-think
the way they manage compliance. This
includes developing a program that
is built upon five key success factors:
standardization, automation, change
management, process visibility, and
cost control.
Standardize All
Compliance Activities
The pace of regulatory change is fast
and furious – and it’s not slowing down.
Unfortunately, community banks don’t
have the luxury of guesswork and
indecision. “We don’t know what to do”
and “we don’t understand” are beacons
of inefficiency. Instead, banks must
have the agility to quickly interpret,
identify, and respond to risks exposed
by new regulations.
Based on federal agencies’ regulatory
guidance, community banks should
consistently follow these steps to
develop a standardized compliance
program to manage regulations:
1. Construct a risk assessment to
determine the bank’s exposure.
2. Issue a written policy around
the ruling or change.
3. Define the procedures needed
to ensure compliance.
4. Do periodic monitoring to
track staff performance.
5. Conduct an audit of
compliance activities.
Standardization is the linchpin
that allows banks to re-think how
compliance is accomplished. By
bringing rigor and procedure to how
the institution responds to regulatory
changes, compliance management
becomes less resource intensive and,
ultimately, more effective.
Automate, Automate, Automate
Compliance is still painfully manual for
most community banks. Staff can easily
spend hundreds of hours gathering and
reporting – writing emails, attaching
documents, updating spreadsheets,
chasing down responses, interpreting
data, etc.
But, once there’s a standardized
methodology for treating regulatory
requirements, an institution can
leverage automation tools that will
dramatically reduce the time, expense
and effort needed to manage the
compliance program.
An automated platform can organize
everything compliance-related in one
centralized system – all of the federal
Andy Greenawalt, Founder & CEO, Continuity Control, New Haven, CT
It’s Time
to
Change
the
Way We Manage
Compliance Costs
