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Diplomacy…Tact…Discretion
In an interesting session at the close of the recent American Bankers Association Regulatory Compliance Conference in San Diego, about 400 bankers met with regulators from each of the agencies. After a short introductory presentation by each of the members of the regulatory agencies, the bankers were invited to ask questions. These were not field examiners. These were individuals in positions of regulatory authority and in decision making areas of the agencies.
It was not a polite question session.
The bankers, from all types of financial institutions, had some pretty pointed, barbed inquiries. And the regulators did again what they seem to do quite well. After each question, as part of their response, they each talked at some length, but gave out very little hard information. There was considerable "I'll have to look into that when I get back" going on. In some cases, they even managed to initiate some laughter.
For instance, when one of them (we'll be kind and leave them unnamed) was discussing the examinations on Community Reinvestment, the comment was made that the examiners do not look for paperwork. And they definitely are not looking for quantity of papers. They are, instead, looking mainly at performance. A restless stir started in the crowd of bankers. And when the regulator looked up and in all sincerity said, "I mean it-that's what they're looking for-performance ... not paperwork!"... it took a while for the laughter to die down.
How about it, compliance officer. What's the first thing the field examiner wants to see when they come in to do a CRA exam? Compliance officers I've talked to say the first thing the examiner wants to see is the paperwork. And the bankers in that room knew it too. As one banker so succinctly put it-an examiner told him, "If it ain't documented, it ain't done." Performance over paperwork was NOT what they were looking for.
We've no doubt that the senior members of those regulatory agencies made the decision that the examiners should look for performance, not paperwork. But evidently that fact has not been communicated to the front line where the action is taking place.
The more questions that were answered, the more obvious it was that communication of new policies in the regulatory arena are not being put into practice by the examiners. The folks on this panel were reasonable people, with livable, consistent policies. What happens between them and the examiners who are supposed to enforce those policies?
Would one agency instead of the present structure make a difference? The bankers seemed to think it might. When one compliance officer asked if there was any chance there might, in the near future, be just one regulatory agency, the room burst into applause. The regulatory representatives on the panel were not amused.
As our financial institutions grow more lean, our compliance officers grow more knowledgeable, and the regulations grow more complex, the regulatory examinations become more difficult when the field examiner is not sufficiently informed and trained.
Compliance officers-you're going to have to learn one more skill-tact.
Copyright © 1993 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 4, No. 2, 7/93
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