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Regulatory Environment

The constant evolution of federal and state banking regulations demands attention from bank and credit union executives. Proposals such as Dodd-Frank, Basel III, the Consumer Protection Act, the FASB’s Current Expected Credit Loss (CECL) model and the Volcker Rule can make it difficult for bankers to know what is required for compliance, what is encouraged and what is just being considered.

These complex rules continue to have an impact on examinations, as highlighted in Sageworks’ Bank & Credit Union Examination Survey. Among the areas generating the most focus and criticism were:

  • Calculation and methodology of the ALLL
  • Documentation of processes, calculations and assumptions
  • Risk rating systems
  • Inconsistent loan reviews
  • Real estate valuations and concentrations
  • Loan portfolio administration, especially documentation exception issues

Given the challenging environment, banks and credit unions will need to increase efficiency in order to manage portfolios adequately and comply with regulations. Software solutions can help improve efficiency and accommodate new or changing regulations with ease so that management can focus on strategic objectives and long-term growth.

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