7 bank exam tips—from a former bank examiner!
As head of product for CBANC’s vendor management application, I field a ton of questions from banks and credit unions about examinations and how to prepare. So on the FI side of things, we’ve pretty much seen and heard it all.
And we thought…wouldn’t it be interesting to have some insights from the other side? In other words, get some advice from the people responsible for carrying out an exam?
So, we turned to none other than a former (or should we say, “reformed”?) bank examiner: Angela Lucas, Managing Partner at Sterling Compliance. She shared her top tips for preparing for an upcoming exam, and conducting the exam once the examiner is on site. (Thanks, Angela!) Here they are, straight from the horse’s mouth!
- First comes the Request Letter—the daunting multi-page document that outlines everything you must provide for the exam. The key, when prepping request materials, is to work smarter—not harder. Review the whole letter in its entirety and start penciling in the individuals in each department who you will enlist to help you in gathering materials. Set an internal deadline for submission of request materials in advance of the deadline your regulator has set. This will allow you some cushion in the final push to get the materials in and to account for any last minute glitches in the upload process. If you are unsure of what a specific request item is actually referring to, ask. It will save you boatloads of time later if you ask and get the materials right the first time.
Be organized. Make sure all request materials are well-labeled and nicely presented. Even though you are required to upload the vast majority of the materials in electronic format, you will undoubtedly be asked for hard copies once the examiners are onsite. Be prepared for that request by keeping hard copies of the request materials in a neatly organized format that can be easily accessed and reviewed by your examiners.
Address all internally-identified issues, and those cited by your audit and compliance functions, prior to the exam. If corrective actions have not been implemented, be sure to have the reasons for the delay readily available—and that any delay can be supported.
Schedule a meet-and-greet for the first day of the exam. Invite department heads and others who will be primarily interfacing with the examiners. Set the stage for exam communications in this initial meeting – who they should talk to for the various pieces of the exam, where each staff member is located in your institution and their contact information. This is also a good time to request that your examiners provide a status update at the end of each week so that everyone stays on the same page throughout the exam.
Coach your staff. Make sure they are well aware of their areas under examination and if they are unsure of how to respond to an examiner’s question, make sure they feel comfortable saying, “I’m not sure, but I will look into it and get back to you.” And make sure that they do. The worst thing they could do is try to talk their way through an answer without being 100% certain it is accurate.
Lay your cards on the table. I’ll never forget the bank President who walked into our initial meeting, sat back in his chair and said, “Ok, here’s what’s wrong.” He then proceeded to list out every deficiency or issue that had been identified since the last exam and what the Board and management had been doing to correct them. If the issues had not yet been corrected, he explained why. He then followed up this discussion with a detailed outline of everything he had just verbally communicated. It was that candid conversation at the outset that made the exam run smoothly, made the communication more effective and demonstrated that, while the bank had its issues, the Board and management were on top of them.
Take action before the exam is over. If there is even an inkling of an issue during the exam, ask the examiners about their recommendations on corrective action. Rally the troops and get an action plan together before the examiners leave. Your commitment to correcting the issues will not go unnoticed.
There you have it…and now you know what bank examiners are looking for when they walk into your financial institution. Have questions, or looking for help to prepare? Email me anytime: firstname.lastname@example.org.