On November 10, 2011, the FDIC updated its 2012 Plans to Review Existing Regulations for Continued Effectiveness (“Plans”). In a relatively short document, the FDIC described its 2012 priorities relating to the implementation of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The 2010 law makes major changes to the financial industry including the regulatory responsibilities of the FDIC. As the implementer of bank closings, the FDIC has received most of the media and community bank attention during the recent economic downturn. Thus, the FDIC’s Plans are big news; for whom?
While lawyers, accountants, consultants, and other experts grapple with the impact of Dodd-Frank on capitalization, ratios, liquidity, and ATM fees, the human resource professional within a community bank must translate the new strategies and solutions into action; i.e., acts performed by real people. The challenges of the human resource profession in community banks reflect a common problem facing human resources in most industries and businesses; i.e., how to incorporate an avalanche of new regulations into an already complex and crowded legal framework; how to learn and implement an overnight cultural shift towards technology; and how to deal with the ever-present nature of human beings.
The woods are lovely, dark, and deep, But I have promises to keep, And miles to go before I sleep, And miles to go before I sleep. -Robert Frost
FDIC’s Plans Effect on Community Banks
The FDIC’s Plans flow from an earlier Executive Order issued on July 11, 2011 in which the President recommended that “independent regulatory agencies” review “existing significant regulations” in order to Develop … a plan … to determine whether any such regulations should be modified, streamlined, expanded, or repealed so as to make the agency’s regulatory program more effective or less burdensome in achieving the regulatory objectives.”
In its 2012 Plans, the FDIC prominently identifies community banking as a focus. Within the FDIC’s community banking comments reside a number of human resource responsibilities. Unfortunately, the Plans do not identify the areas as HR related. The Plans’ wording reflects an FDIC position that communication of the Plans’ contents should be conveyed through senior board members or executives who will share the information with other responsible members of a community bank. While senior officials retain ultimate responsibility for the condition and operation of a community bank, today’s prudent business practices require involvement of HR in the early stages of strategy development.
As far as new policy is concerned, the FDIC’s Plans offer sections entitled, “Evaluation of Examinations and Rulemakings Affecting Community Banks” and “Streamlining and Transparency.” (The remainder of the Plans restates the FDIC’s rulemaking obligations and its satisfaction of those responsibilities.) In 2012, the FDIC will review its examination and rulemaking processes to better understand the challenges and opportunities for community banks. The FDIC plans to hold a conference early in 2012 on the future of community banking including “changes in business models and cost structures”. The FDIC will “suggest lessons to be learned.”
At this stage of most community banks’ recent regulatory/economic experience, anything the FDIC “suggest[s]” about a business model or cost structure may be perceived by the bank as gospel. With the FDIC’s announcement that suggestions will be made about “lessons to be learned”, community banks should anticipate receiving, vetting, and incorporating another round of best or better practices.
Following its general reference to a business model and cost structure, the FDIC states that the agency “is also reviewing key challenges facing community banks such as:
- Raising capital
Does not directly involve HR
- Keeping up with technology
When did “keeping up with technology” become an HR function? While most in HR have had the experience of watching well-intentioned IT plans and disasters roll down-hill to HR, only recently has HR learned of “information governance”, a developing strategy in which professionals are trained in both IT and HR. The viral spread of IT as a culture portends the growth of information governance as a business methodology. Stated differently, HR must keep up with technology. (The FDIC’s announced intent to make greater use of “technology and automation” only heightens HR’s role in technology.)
- Attracting qualified personnel
“Attracting qualified personnel” has and will continue to be an HR function. Acquiring top talent is necessary for a financial company. For a variety of well-publicized reasons, the problem of attracting human capital will become worse.
- Meeting regulatory obligations
“Meeting regulatory obligations” has always been an HR responsibility. Because most regulatory non-compliance stems from human beings, HR typically knows or suspects most of the violations. With corporate governance, risk management, and compliance supervision being highlighted in FDIC examinations and legal actions, HR will continue being directly or indirectly responsible for meeting regulatory obligations.
Except for raising capital, the FDIC’s listed areas of key challenges directly involve HR.
Streamlining and Transparency
In a section entitled “Streamlining and Transparency” the FDIC continues efforts directed towards community banks. In future FDIC Financial Institution Letters (FDIC alerts of regulatory changes or guidance), the Agency will insert an introductory statement explaining whether a change or guideline applies to institutions under $1 billion. This simple alteration will provide more time for community banks to evaluate the impact of a regulatory change. For example, had the multiple laws and regulations recently issued about mortgage loan originators contained an upfront answer to, “Does it apply to my bank?”, countless hours of research, expense, and confusion might have been avoided.
The process of integrating human action with community banking objectives should require and involve the skills found in the HR department. Unfortunately, HR tends to be the last section of business to learn of the FDIC changes. Part of the problem comes from regulators’ failure to recognize HR’s responsibility for implementing American banking law. This problem exists, in part, because few inside or outside the regulating agencies possess the knowledge or incentive to learn the business of banking and information technology, and the US banking, information, and workplace laws.
A concluding sentence of a section in the FDIC’s Plans should gain the attention of every community bank. “This overall effort in regard to community banks will be a major priority for the FDIC during 2012.” HR will be directly affected by most of the Plans’ 2012 public discussions and FDIC “suggestions.” Will HR participate in the discussions or hear the FDIC suggestions? The community banking industry’s perception of HR may help answer a looming HR question for all US businesses.
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