Pub. 15 2018 Issue 1

O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S 14 T he board believes the com - pliance officer has been given adequate policies, training and staff to ensure the bank will not encounter any issues when the regulators arrive for the com - pliance exam. So the exam should be a non-event right? Let’s talk about the process of an onsite visit. For the staff involved, the onsite regulatory visit can be painful to endure, but it is necessary to ensure the safety and soundness of the bank. An overlooked mistake could be minor in the overall scheme of things; however, in the worst-case scenario, it could cause major penalties up to and including personal liability for the board.  So how do you know whether your bank is ready for an exam? How do you determine whether you’re conduct - ing the proper periodic maintenance and routines to keep your compliance programs as effective as possible? The answer is simple by examiners stan - dards: by exercising proper oversight of these programs at the board level. If only there was a definite way to deter - mine what the regulators deem “proper” oversight. Oversight is carried out by reviewing the right reports with the right content at the right times.  The board must ensure that they are being given solid, accurate information to carry out their fiduciary duties as well as to make informed decisions. One way to do this is to demand quality reports at specified intervals. Reports that are inac - curate, incomplete or delivered too infre - quently may conceal weaknesses that should be addressed. Reports should occur at three basic intervals: monthly, quarterly and annually. Monthly reports should focus on the execution of the board’s policies by delivering performance data and metrics. These reports should cover frontline activity and clearly demon - strate whether the day-to-day work of compliance is being done on time and accurately. Monthly reporting should expose where weaknesses may exist, and state the corrective actions being taken to remedy the deficiencies.  Quarterly reports should focus on trends and analytics that demonstrate whether risk exposures are increasing or decreasing. The quarterly report gives insight into how the compliance program is functioning over time. These reports should contain information about regulatory trends and upcoming or changing rules in addition to consid - ering the environmental and operating conditions that could affect the bank’s progress and performance. These reports should also summarize the results of compliance monitoring ac - tivities that occurred during the quarter and which activities are planned in the quarter ahead. This data allows directors to conclude what, if any, internal events The Regulators are Coming, The Regulators are Coming… By Darlia Fogarty, Director of Compliance and COO for Compliance Alliance