re: Regulation: Killing Community Banks?
As a community bank CIO, I found my days increasingly consumed with analyzing and addressing the impact of ongoing regulatory changes. We were continually reworking business processes to ensure compliance, updating notices, reviewing contracts, and expending resources to deploy yet another compliance update to a system or software package.
The value to the consumer was not particularly apparent, but the impact to operations was obvious. Resources that would have gone to improving customer service or working on strategic projects to grow sales were redirected to reactive activities related to compliance changes.
The reality is that smaller financial institutions don't have the money to simply add systems or staff to deal with the cascading impacts of the next change to a regulation. The economics of community banking don't support adding add another solution that isn't increasing revenue.
For smaller financial institutions, the best solution appears to be to move to outsourced solutions and integrated vendor hosted services, shifting as much effort and risk to the vendor as possible.
This approach would allow the FI to focus on sales and risk management, while ensuring they have best practices based solutions and needed specialized skill sets (through their vendor), but without adding personnel or just trying to make due with already stretched internal staff.
Further, the availability of skilled personnel in small markets is a challenge for many community banks. Outsourcing may be their only option to ensure they can meet their regulatory obligations.