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Your next exam is scheduled. Are you prepared to handle it?

By: Jeffery Schmid, CRCM, CERP
FIPCO Director of Compliance and Management Services

Whether its your first exam or twentieth, the notion that your regulator expects to perform a deep dive of your operations, lending, compliance, finances, IT, and BSA can send any banker screaming into the night. But it does not have to be that way if you are prepared to handle it.

Certainly, there is a new dynamic in the format in which these exams are being carried out today. In most cases, they continue to be remote. This might sound like relief, however, the constant barrage of electronic communications and delayed responses by both parties is far from utopia. In fact, most bank CEO’s who have gone through this process in the last 12 months have reported dismay and frustration with the overall process as compared to the onsite visits we had pre-pandemic.

So, what is a banker to do? First, treat the exam if it was actually taking place onsite and dedicate your calendar accordingly. When I was being examined, I made sure I cleared my calendar for several days (if not weeks) in order to respond to examiner questions and additional requests. The sooner we could conclude the exam, the faster we got back to carrying out normal business. This should be no different for an exam that is happening remotely. The mere fact that an examiner is not sitting in the conference room next your office does not mean that they are not working on your exam, including those hours in which your bank may not even be open. Working remotely allows examiners to be a little more flexible with their workload and that alone may change your expectations.

Next, use the CIDR to your advantage. The regulator has shown their hand on what they expect to examine, and they afforded you plenty of opportunity to gather the documentation and answer the questions well in advance. As you answer the questions and supply the samples, take a few minutes to review it yourself to be sure there is no ambiguity in what you are delivering. An ounce of prevention is worth a pound aggravation.

Know your examiner and set expectations. During the initial call, be sure to schedule future daily calls with your examiner on the onset of the exam. During prior exams, it was too easy to just pop in for updates, but in today’s environment, everything is more structured. To pass on the opportunity to dialogue with your examiner regularly through the entire process will only delay the exam itself. Again, be sure to clear your calendar for these meetings.

Keep your uploads handing. Since examiners do not have the benefit of flipping through paper reports or files, it can be increasingly difficult to find an electronic document, especially since not all banks follow the same format, logic, or naming convention. This process alone makes the review take twice as long as it normally would and results in examiner requests for something you have already uploaded. Be sure to have these files at the ready so you can resend or resubmit on the fly and clear any potential violations. Until the agencies can develop a centralized process or system for better files submission, I am afraid this obstacle will follow us for some time to come.

Finally, communicate, communicate, communicate. Be sure all members of your bank staff are engaged during the remote calls, including any outside vendor who can assist with clarifications or resolutions. I have found that there is nothing worse than a key employee not participating in a call who was in the best position to answer the question immediately.

After you receive your call from the Supervisory Examiner, feel free to reach out to our ShareFI team to see how we can assist you through this remote exam process and make it more valuable to your team by emailing me at jschmid@fipco.com. There is value in ShareFI.