Are Fox(es) Watching Your Bank Hen House?

We’re all familiar with the old adage,“ Don’t put a fox in charge of the Hen House”! We’d all agree that doing that is a very bad idea. And yet, since the dawn of the new oppressive banking regulations era 6 or 7 years ago, I’ve observed that bank after bank across the country is doing exactly that. This leads to sleepless nights, and daily scratching of CEO and Board of Directors heads wondering why their bank’s earnings and growth continue to suffer!

Well, here’s the bad news: There is more than one fox that may be sitting and gazing at your bank, salivating! The good news is that these foxes can be eradicated if we recognize them, and have the guts and fortitude to do something about them. Today I’m going to briefly overview just one fox, and in future discussions we’ll overview some of their fox siblings and cousins.  

The first fox for many of you: Your almost paranoid emphasis on compliance. Should you stay on top of compliance? Absolutely! Should it become the CEO of your CEO and board emphasis? Absolutely not!!! Never forget that every bank, large or small, local or spread across the nation, should first focus on the two “P’s“: Performance and Perception. If your bank is so focused on compliance that your compliance focus interferes significantly with your bank’s Performance, you have a problem! In many banks today, the bank CEO has effectively allowed the bank’s compliance officer to become the bank’s CEO in critical areas. This affects your bank’s Performance, and your diminishing Performance affects you, your board, AND your customers. Now you have a second problem: Your Performance drop  negatively affects your market Perception.  And your bad Perception then further affects your bank Performance. It’s a Catch 22 which you must avoid, or get out of, as quickly as you can!!!

Compliance emphasis. Where does it fit in your bank? That’s something you really need to focus on so you can develop the emphasis that is specifically right for your bank. For one bank  that I’m very familiar with, the emphasis has been on making a large volume of quality loans to carefully selected key markets, and on controlling bank wide expenses. The result has been that they are the best earnings on assets bank in their state, and resultantly face less regulatory interference than most banks face. Compliance emphasis. It’s a “One size does not fit all” situation. Compliance. You can’t take it or leave it. You can control your focus and exercise more control over your bank operating results! It’s up to your bank to set the course. Every bank has likenesses, and every bank is as individual as a fingerprint. Get the help you need from whomever you need, but get it as soon as possible.

The next blog from Early & Company: Another fox watching the Hen House.