With the current “eye of the regulatory storm” being mostly focused on asset quality, IRR and problem loans, you might be forgetting to check up on “not so blatantly obvious” potential for regulatory scrutiny. This blog is being issued as a reminder to check up on the small issues, because the regulators just might be circling back around on these:
Regulation GG – Make sure you updated your account disclosures for business account applicants to include a notice regarding the prohibition of internet gambling. Also, if you hadn’t done it when it was required long ago, make sure you sent notices out to all existing business account customers advising them of the requirements of Reg GG. If you did not previously send notices to existing business customers, do it now. Regulators may cite you as a violation of Section 233.5(a) of this regulation if notices are not sent.
Consumer Complaints – Make sure you have proper policy and procedures in place for the handling of consumer complaints. Ensure you have a log book that tracks the complaints. Ensure the log book includes the assignment of responsibility for handling the complaint and documents all relevant dates (ie: date received, date assigned, date resolved, date customer was notified of outcome).
Outstanding Real Estate Taxes – Ensure your loan policy contains language on monitoring and follow-up procedures for borrowers that are delinquent on property taxes. Items that should be included are: procedures and necessary forms that should be found in the file; time frame for when the loan officer should contact the taxing authority; and the process for bringing the delinquent taxes to the attention of the Senior Management. Ensure you are maintaining a report showing loans with unpaid taxes that includes the amount of taxes outstanding and when the taxes were last paid. The report should be utilized in management's reporting functions.
Management Succession Plan – Ensure you establish a formal management succession plan. It should be well-documented and formally approved by the Board. The management succession plan should address management's continuity for each key position of the bank.Accounting Policy and Procedures – Ensure the policy, which includes procedures, describes all applicable accounting topics. Ensure it includes procedures on management reporting and approval regarding general ledger entries, the chart of accounts, suspense accounts, and daily reconciliation.
Segregation of Duties Over the Wire Transfer Function – Ensure there is adequate segregation of duties involving wire transfer operations. The same individual assigned to verify and release wire transfer transactions should not also have responsibility for reconciliation of the transactions. Management should ensure that the functions involving verification, release, and reconciliation are appropriately segregated.
Vacation Policy – Ensure that what is in your vacation policy agrees with your practice. Also ensure that your vacation policy describes the process for approval of waivers, as recommended in the Department Industry Letter on Vacation Policy issued August 22, 1996. This Industry Letter provides guidance to banking institutions. It encourages banks to maintain a written vacation policy which, at a minimum covers those officers and employees involved or engaged in transactional business or having the ability to change the official records of the institution. They suggest that employees in sensitive positions should be required to take at least 2 consecutive weeks of vacation on an annual basis. During such time, they should offsite and offline. In other words, not only physically away but also not have the ability to conduct any transactions while away. And while they realize that exceptions may occur, they recommend that the same individuals not be permitted continual exceptions.
Again, hope this helps! These are just some of the things that I have heard through the grapevine that have caught the regulator’s attention!
Senior Quality Control and Review Specialist
Sharon Geiger has 27 years banking experience, 21 of which have been involved in internal audit. She has extensive knowledge of all aspects of the banking industry, with a particular emphasis on regulatory compliance and identifying risks and controls. As QCR Specialist, she performs Quality Control Reviews to ensure all workpapers and reports are completed in compliance with the firm's standards.