Don't Take It Sitting Down

In this issue, we are giving attention to several important areas of the compliance management process including participation in rule makings. For compliance regulation to be effective and minimize burden, banks must be active in the regulation drafting process.

Taking control of the regulatory environment is as important to survival as new powers. Regulatory burden is expensive. But even more significant, a regulation or requirement that interferes with business operations intensifies the burden. It is possible, at least theoretically, to design requirements and regulations that work with business goals rather than against them. But to do this, the regulation drafters need your help. They need your ideas, your information, and the business facts you can provide.

A compliance regulation never sits by itself in a single time slot and "happens." Compliance is ongoing. Compliance is process. It is not a "been there, done that" exercise. It is classic risk management and it goes on from day to day, with every repetition of the task and with every single product transaction with each customer.

When examiners come in, they look at what the bank has as an ongoing compliance program, not simply at what the bank did in response to the last exam. (Don't ever underestimate the importance of clearing up exam or audit findings!) The ultimate test of a compliance program is how well it is working not how well you did something last year.

Examiners emphasize process. The examination looks at the compliance program, the policies and procedures and controls that carry the bank's compliance level throughout the examination cycle. Only this ongoing commitment to managing compliance can ensure that the bank avoids significant compliance risk.

For process to work and for compliance burden to be minimized, the rules and regulations must make some business sense. This is where bank input is critical. The bank should study a regulatory proposal and think through how the bank can comply with it. Then look at other ways that might work equally well or better and still serve the same goal. These ideas must be shared with the drafters of the regulation.Information is power. In the regulatory process, information that you have has the power to shape the regulation and the industry's future.

You have information that regulation drafters need to create a regulation that works. Unless you provide that information, it won't affect the outcome. I have yet to meet a regulation drafter who has well-developed ESP. They need something tangible. They need your comments to get the information and that means that you should write a letter.

Your control of the process comes from the information and ideas you provide to the regulation drafters. That information will help them to shape a regulation that works. Without that information, the regulation drafter has little to work with sometimes as little as a statute and an active imagination. Your information and ideas are an indirect method of controlling the shape of regulations. Banks must actively take this type of control over their regulatory fates as new powers become available to them. Without bank determination in rulemaking, the rules and conditions placed on new powers may so restrict banks that the new powers will be unable to deliver the needed push to the industry. Only by taking an active role in deciding how new powers may be exercised will banks really be able to compete on their terms with non-bank competitors. Untie your hands by participating more actively in the process. It is part of your job. Write that comment letter!

Copyright © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 18 & 19, 12/96