2019 Journal of Community Bank Case Studies

2019 COMMUNITY BANK CASE STUDY COMPETITION

of individual institutions and the industry as a whole (Consolidated Reports). This is one of the many ways regulators assess the financial health of the banking sector. Kish currently completes about 90 pages in call reports each quarter, compared to 15 pages in the 1980’s. According to Mr. Baxter, this regulatory burden has resulted in 40 hours of additional work to construct the report each quarter. Stress Testing Under Dodd-Frank, stress testing is a form of regulation that requires “both bank managers and regulators to understand what would happen to banking institutions if they were subjected to exceptional but plausible macroeconomic shocks” (Kapinos et al.). Under current regulation, Kish is not required to complete stress testing like larger banks. However, regulators have strongly suggested that community banks stress test regardless of regulation. Currently, Kish stress tests its

balance sheets, capital ratios, liquidity, and cash. For the balance sheet and capital, stress testing is completed once a year while tests on liquidity and cash are preformed once a month. One of the problems related to stress testing is the differences between regulatory models and the internally developed models used by many community banks. Regulators want to see that Kish is generating the same results as the regulatory stress testing model, but the use of different models means that the results may vary. Resources Dedicated to Regulatory Compliance Currently, Kish has three full-time employees dedicated to regulatory compliance compared to one full-time employee working on such requirements pre-2008. Mr. Robert Sunday III, VP, Compliance Officer has been with Kish since before the Great Recession, and prior to the passage of Dodd-Frank, his responsibilities included areas outside of the very specific compliance focus he has now. With the issuance of many new regulations, all of his time is devoted to ensuring that the bank keeps abreast of these regulations and complies with ongoing implementation of new rules under Dodd-Frank. He has also added two full-time employees to assist him in this endeavor. To supplement Kish’s in-house team, it employs the services of three different third- party providers for support with regulatory compliance. The first is the American Bankers Association (ABA) which provides consulting services to Kish. Mr. Sunday sees this as invaluable as the ABA interacts with many

To supplement Kish’s in-house team, it employs the services of three different third-party providers for support with regulatory compliance.

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