2019 Journal of Community Bank Case Studies

2019 COMMUNITY BANK CASE STUDY COMPETITION

sensitive to market risk) from regulators can now be examined every 18 months rather than every 12 months. Previous to the passing of this bill, the exam cycle extension was only available to qualifying banks operating under the $1 billion asset threshold. While an important and appreciated process for the institution, regulatory examinations are very resource intensive. Examinations require months of preparation from the bank’s management teams culminating in a comprehensive three-week on-site visit. Walk-throughs are conducted, questions are answered, and many meetings are held to make sure the bank is compliant with all regulatory guidelines. Daily tasks must still be completed by all members of the bank during these weeks. Moving from a 12-month to 18-month exam cycle will create additional time for improving internal bank operations. Marc Bule, chief audit officer, highlighted the qualitative benefits the relief will bring. “With

the 18-month cycle we are able to focus our efforts on those areas that are most important to the bank—the high-risk areas. Everything we do as internal audit is risk related. Focusing on the high-risk areas helps the bank and helps management. Our job as internal audit is to provide reasonable assurance to management that internal controls are in place and functioning. If we have the time freed up, not spending time with examiners, but actually in our internal audits we are able to provide the coverage necessary for management as needed. We can focus on serving the community” (Bule). The new 18-month cycle will not only give employees of the bank more time to work on individual assignments and serve customers, but will also allow additional time to implement changes recommended by examiners. Putting new controls and processes into place can be a difficult and timely task. When implementations have finally been fully integrated, the bank may have little track history for regulators at the start of the next cycle. Bule explained, “If there is software or a major process that has to be implemented, the 18-month cycle will potentially give us enough time to implement that, put the right people in place, test it, vet it, make sure it is up and running, and then the examiners can come in an validate that new process or software” (Bule). People’s Intermountain Bank predicts that extending the exam cycle will increase the quality of feedback from examiners as there will be a longer history of implementation.

Putting new controls and processes into place can be a difficult and timely task.

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