States may pick up the slack in bank regulation…are you prepared?

It wasn’t just the American electorate that was caught off-guard with this past election result, as many banks are scrambling to understand what this means for the next four years.  Regardless of how you feel about the election results, it’s important to consider where we go from here and how it will affect the needs within your bank moving forward.

Consider this statement from a Nov 16th article at ‘Faced with a less aggressive CFPB, state attorneys general and financial regulators may be emboldened to ramp up their enforcement activity, with Democratic-controlled states such as New York, California and Illinois already known for an activist approach likely to take the lead.’ This is something very few are talking about within the industry right now, but this concept is beginning to pick up steam.

A Nov. 23rd editorial at states ‘the pendulum is likely to swing once again in the direction of state regulation and enforcement, and away from active federal prosecution.’

Based on conversations with numerous banks throughout the country over the course of this year at The Richmond Group, it seems many banks were gearing up for the exact opposite.  However, with two well-established publications predicting a sea-change in bank regulation enforcement, the question for your bank needs to be: what are you doing to get ahead of this?

This change doesn’t necessarily mean having to install an entirely new team in the back office.  One of the most effective things a bank can do is make sure they have the highest level quality bankers on the front end.

Are your commercial lenders adept in credit?  If so, this will help mitigate a lot of the regulatory problems seen at other banks.  If your team of commercial lenders are more sales-focused, it may be time to consider adding a couple of senior lenders that can mentor the rest of your team in credit and lead by example.

While it may seem overly-simplistic, this solution may be the best way to ensure that your bank stays safe and clean at all times.  Regardless of the headwinds.