Community bank regulatory crossfire

• Published in: The RMA Journal 2006-09, Vol.89 (1), p.40
• Main Author: Foster, Beverly
• Format: Article
• Language: English
• Subjects: Bank compliance; Bank examinations; Bank examiners; Banking law; Cash flow; Commercial real estate; Community banks; Compliance; Conferences; Interest rates; Loans; Loss reserves; Regulation of financial institutions; Regulatory agencies; Risk management; Surveys; Underwriting
• ISSN: 1531-0558

After surveying its Community bank members to learn their top concerns, Community Bank Council meets annually with the regulatory agencies in Washington, DC, to discuss those issues. This year's audio-conference took place in June, and the representatives of the regulatory agencies addressed three major topics: 1. credit quality and underwriting standards, 2. proposed guidance on commercial real estate concentrations, and 3. the regulatory burden. As one regulator pointed out, many banks are now pricing for competition -- not pricing for risk, particularly as credit has become more commoditized. A number of banks have reported pushback from their accountants on the allowance for loan loss reserves, said a panelist. During the audioconference, in response to a question from the audience, a panelist said that some banks are not necessarily evaluating the cost/risk trade-off appropriately. Those banks that have had a sea change in their risk profiles should not expect that risk management can be business as usual.