6 Simple Tricks To Help Prepare For Your Next Compliance Examination

I’ve been through the examination process nearly a hundred times as an FDIC examiner. I’ve compiled my Top 6 list of simple things you can do to set your bank up for greater success on your next compliance exam. Many of them don’t cost anything, just a little bit of effort.

1.  Prepare a Compliance Management System (CMS) binder: Every single bank should do this because this is what you're rated on. Take all of your CMS related information and put it in one neat place: 3-ringed binder, intranet, or shared drive is fine. Make a folder for all of your compliance-related policies and procedures. Have a section for everyone’s compliance training. Put monitoring and audit reports in another section. You can even have a section for oversight. In that section, talk about the overall compliance efforts for the bank (e.g. the bank has appointed a compliance officer, formed a compliance committee, formed an audit committee, trained the Board on Regulations, keeps up-to-date on all new and changing regulations, etc). Have an organized and well-thought out presentation to give to the examiners when they get onsite or include it with the pre-exam request list. It will show you understand your CMS and are proactive to make it stronger. Make a good and accurate presentation and then watch those comments show up in your report.

2. Do some refresher training: If you have access to web-based training, have your employees spend an hour or two on their primary job functions. I still use BAI training for quick refreshers on regulations and I’ve spent thousands of hours reading regs and examination manuals. Have your deposit folks take some Funds Availability training or reread your Reg E dispute procedures. Have your real estate team refresh on TRID or do a quick refresher for all of your lenders on fair lending. Don’t be surprised if the examiners do a fair lending interview, and you won’t know who it’s going to be until they are onsite. Examiners will evaluate the knowledge level of your staff, so take a little extra time to set them up for success.

3.  Make sure your policies are up-to-date: I was the examiner-in-charge once where the bank had a generic policy (I don’t remember which regulation) that had another bank’s name on the top. They basically bought a cookie cutter policy and didn’t even bother to change the bank name to their own. Right away I knew their policies were ineffective, and that reflected accordingly in their rating. Take a few minutes and make sure your policies are relevant and written for your bank. Customize them to talk directly about your institution. It’s not hard; it just takes a little extra effort but goes a long way to show the strength of your CMS.

4.  Do a lobby walk-thru: Take a few minutes and stroll through the lobby, looking at every disclosure. Does your CRA notice have the old Federal Reserve address? Do you still have the temporary insurance on IOLTA disclosures in your lobby (that expired 5 years ago and I still find them)? Are FDIC stickers in the right spots and absent from places they should be (e.g. investment or insurance areas)? I’ve seen a bank purchase a branch that had a different regulator, but none of their disclosure were updated to the new regulator info. If you have a pin-up board in your entrance, make sure community members don’t put up advertisements over key disclosures. That is a common mistake that is simple to fix. Common errors like that give the impression that you’re not paying attention. You can also spend some time reviewing your website for anything that has recently changed.

5. Address all old issues: Go through all of your prior examination and audit reports and make sure to address all issues. Few things look worse to an examination team than findings, violations, and recommendations that were not addressed. This doesn’t mean that everything has to be fixed, but make sure it’s within reason. If you have a recent audit report with findings, keep a log for corrective action and timelines. If you decided for one reason or another not to implement a recommendation, document and support that decision. Nothing screams reactive or ineffective compliance posture like aging unresolved issues.

6.  Look at the document request list: The areas the examiners will focus on should somewhat follow the document request list. You can take a few minutes to review many of those areas using the tips from above.

I’ve went through the exam process many times. If you follow these simple tricks, you will have a much better start to your examination. I would welcome the opportunity to spend a few days at your institution helping you get ready. Having me visit is much cheaper than you may think. Send me an e-mail today to learn more: tory@tcconsulting.us.

Jake Peterson