You might find it interesting that there are a handful of things hotel owners will do to attract guests. A survey of 25k hotel owners by TripAdvisor found that in the U.S., it comes down to offering discounted rooms (58%), free Wi-Fi (44%), free parking (31%); free newspapers (20%) and a free night’s stay (14%). The next time you rent a hotel room for yourself, or make a loan to a hotel, you might want to check and see what they offer and how they offer it, to gain some additional insight.
When it comes to insight, we cannot think of a community banker that wouldn't want to get some inside scoop on how to deal with examiners and examinations a little better. This is why we combed through lots of regulatory documents and information, talked to bankers and reviewed recent speeches and other sources for you this morning.
To begin, it is in your interest and regulators want you to have open lines of communication with them. Taking the time to meet with regulatory staff in your offices or in theirs periodically helps build credibility and it can give you insights. Doing this makes sense because you can get questions answered, understand key areas of focus and get to the bottom of new regulations in many instances. It also gives you a chance to update regulators as to what your bank has been doing and what it may do in the future to gauge concern or better understand potential requirements. You have to do this when you do anything significant anyway (such as branching, M&A, capital retirement, investments in real estate, changes in control, etc.); so getting in the habit before you absolutely need to do so also helps improve your understanding of the process and regulatory players.
When it comes time for an exam, understand that regulators are looking at both qualitative and quantitative factors. They are seeking to understand your policies, risk management process, financial position, business strategies and the like. Preparing presentations and ramping up dialogue in advance of the exam can be beneficial as well. It is perfectly ok to ask examiners what they are most concerned about so you can address any issues head on. This also gives you an opportunity to put your bank in context with the industry and peers. Focus on explaining financial trends, significant transactions, organizational structure, business lines, market conditions, strategic plans and anything else you think would help in that manner. This is also the time to be sure examiners understand any additional risk management programs or monitoring tools you use beyond the basics to help ensure everything is properly considered.
Next, it is important to understand the exam itself will be in part driven by your own specific exposures and risks. Concentrations, new product lines, and other factors are all baked into the pie so be prepared to discuss them at length. In addition, understand anything flagged on a prior exam will also be reviewed to ensure the bank has followed up on things and is in compliance.
Finally, understand that the examination itself isn't the only time your bank is reviewed. Every quarter, analysis is run on banks as Call Report data is filed and risk monitoring is applied by regulatory agencies. Oftentimes, things that seem out of place, significant changes in trends and other factors can prompt regulatory follow up outside of exams themselves. Consumer complaints, unanticipated external events and significant changes in the data are all potential drivers, to name a few.
As this process shows, much of what a banker should probably do is to just keep lines of communication open, asking questions and periodically meeting with regulators to better understand requirements, explain changes and gain insight into potential risks, issues or concerns coming your way.