The Smart Compliance Blog

In March, the OCC, Board, and FDIC (the Agencies) requested comment on proposed revisions to “Interagency Questions and Answers Regarding Community Reinvestment.”  The proposed changes add details on how banks can earn Community Reinvestment Act (CRA) credit. Together with a speech by the OCC's Thomas Curry, they are clearly signaling change regarding how CRA exams will be conducted and how the Community Reinvestment will be evaluated. 

In January, it was announced that Community State Bank of St. Charles, Michigan reached a settlement with The United States Department of Justice regarding allegations that it engaged in a pattern or practice of discrimination on the basis of race.

We thought we would ring in the new year with a review of the most popular articles from 2012.  Take a look at the top 5 articles and the 5 potent takeaways from each entry. 

We have officially entered the Holiday Season. This should not be a newsflash to anyone. The mall across the street from our corporate office in Charlotte, has been playing Christmas music and decking the halls since October. Despite the mall’s valiant attempt to move the Holiday Season to October, we would like to believe that December actually marks the “season to be jolly.”

The CFPB released their first Supervisory Highlights last week that reveals the issues  and risky practices their examiners have found between July and September of 2012. The CFPB states that it is committed to periodically issuing perspectives on their examination program, found concerns, and the suggested remedies. To facilitate financial institutions’ compliance with Federal consumer financial law, the CFPB intends to be transparent about the goals of its supervision program and the steps being taken to achieve those goals, while protecting the confidentiality of the underlying financial institution-specific information. While most banks do not fall under the direct supervision of the CFPB, the report provides us with insights regarding the focus of Washington and the regulators. More specifically, they have provided us a solid road map for a successful Fair Lending Compliance Management Program in 2013. 

Last week, the Non-Discrimination Working Group of the Financial Fraud Enforcement Task Force (created in 2009) gathered to provide the industry an update on “Fair Lending Hot Topics.”  Representatives from Department of Justice, FDIC, CFPB, NCUA, HUD, OCC and the Federal Reserve Board participated.  The presentation ranged from the 2012 Fair Lending settlements to Fair Lending Risk Assessments and Compliance Management.  The presentation was a great reminder of the fundamentals associated with Fair Lending.

The Community Reinvestment Act (CRA), originally enacted by Congress in 1978 is intended to encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate income neighborhoods, consistent with safe and sound banking operations.  Each insured depository institution's record in "helping meet the credit needs of its entire community" is evaluated periodically.  That record is taken into account in considering an institution's application for deposit facilities, including mergers and acquisitions.  At the end of the CRA exam, depository institutions receive one of the following ratings of performance:  Outstanding, Satisfactory, Needs to Improve or Substantial Noncompliance.  

In Part 1 of this post, we discussed the 4 characteristics that we see in the most effective compliance officers. We listed the four strategies that they use to better deal with the tremendous sense of being “overwhelmed” by the pace and volume of compliance change during the last several years. As a re-cap, the 4 Characteristics of the Best Compliance Officers are:

Profitable revenue growth is top of mind for all banks in today’s market where consumer preferences are rapidly changing.  Many financial institutions are investing large amounts of time deciding what steps need to be taken to ensure long-term prosperity.  One area of focus that continues to garner an endless amount of debate concerns optimizing the bank’s branch network.  It is common for Senior Management to examine branch profitability and review the impact of losing valuable customers (run-off).  The bank should also consistently include include dialogue regarding the Community Reinvestment Act (CRA).

Business myths are stories with a purpose.  The myths are typically used to justify an approach or belief system.  Most myths are founded on partial truths that have been distorted and/or interpreted over time.  Truth be told, we all have our own myths and legends that we have grown to assume are fact.