Tuesday, April 25, 2017

Bank and Credit Union Executives Express Concerns over Examinations and Regulations

Members of the Federal Reserve’s Community Depository Institutions Advisory Council (CDIAC) raised concerns about compliance examination processes and the current regulatory landscape in a recent meeting, according to minutes released on Friday by the Fed.

CDIAC members are selected from representatives of banks, thrift institutions, and credit unions serving on newly created local advisory councils at the twelve Federal Reserve Banks. One member of each of the Reserve Bank councils is selected to serve on the CDIAC, which meets twice a year with the Board of Governors in Washington.

“The council is very concerned that the working partnership that has existed for many years between examiners and bankers and credit unions is no longer working well, as manifested by increased examination timeframes, less risky concerns being mentioned as matters requiring attention or documents of resolution, and a lack of exam focus on an institution’s overall risk profile,” the group said.

CDIAC members noted heightened concerns over examination activities related to fair lending, Bank Secrecy Act (BSA), cybersecurity, and vendor management. For example, fair lending exams "seem to continue indefinitely, as if examiners must continue to review until they find a problem."

CDIAC members expressed frustration that agencies are using opaque statistical analyses, but are not willing to share their methodologies with financial institutions. CDIAC members stated: "Being able to use the same tools as examiners would help ensure compliance on their own part and would provide examiners with sound, reliable data analysis, thereby reducing examination burden and allowing examiners to focus on higher-risk areas."

Council members said they observed regulatory expectations for large institutions “trickling down” to community institutions, and they emphasized the need for regulators to tailor examinations based on the risk profiles of individual financial institutions.

They also raised concerns about the reduction in the overall level of examiner experience and expertise, noting that less-experienced examiners tended to take a “check-the-box” approach when conducting an examination, rather than focusing on the bank’s risk profile.

Read questions 4 and 5 of the CDIAC minutes.

No comments:

Post a Comment


The content is provided for educational purposes only, with the understanding that neither the authors, contributors, nor the publishers of this site are engaged in rendering legal, accounting or other expert or professional services. If legal or other expert assistance is required, the services of a competent professional should be sought.

Comments appearing in response to articles appearing on this site do not necessarily reflect the views of the ABA. ABA makes no representations regarding the truth or accuracy of commentary or opinions that may be posted in response to the articles that appear on this website.

The inclusion herein of any link to a website, either in the text of an article or in a comment, does not denote any approval, sponsorship, or endorsement by the ABA, and ABA is not responsible for the content or opinions expressed on those linked websites or related commentary. This content is not licensed to third parties sites and is not affiliated with any third party site. Any reference to the author or this content on any third party site on the Internet is not authorized by the ABA.

It is the policy of the American Bankers Association to comply fully with all antitrust laws. Certain discussions should be considered off-limits, including those that contain competitively sensitive data such as price and cost information, or statements that could be construed as reflecting an attempt or desire to control or influence a particular market or markets. Future pricing or other prospective competitive information should never be shared.