By: Joe Gillen
As 2012 comes to a close, community banks are reflecting on the previous 12 months and assessing what they hope to accomplish in 2013. Over the course of the year, the financial sector as a whole has undergone significant change in the way of reforms and new regulations. Compliance rules, new underwriting and mortgage standards and laws governing interchange fees have all impacted local institutions. In addition, uncertainty over whether TAG insurance will be extended remains a question that carries significant weight.
Despite these challenges, community banks have done well in 2012, increasing their membership, keeping reward programs intact, experiencing a consistent stream of fee income and further cementing their positive reputations among consumers. However, challenges remain, and 2013 will be an important year for local institutions as lawmakers make decisions on key issues.
Reaching next year's goals
In response, Resurgent Performance, Inc. CEO Tom Hall has outlined some of the goals community banks should strive to accomplish next year to remain profitable.
He noted that avoiding complacency and staying vocal about opposition to certain regulatory proposals will remain critical next year. Community banks have been successful in lobbying for the extension of TAG insurance and denoting the ways in which Dodd-Frank reforms are largely unwarranted and harmful to community institutions. In fact, the Federal Reserve Board and other committees who influence these reforms are reconsidering their effectiveness and level of harm they may pose to local institutions that were largely not responsible for the financial collapse.
In addition, lawmakers are more seriously considering whether to extend TAG insurance following a bill proposal from Senate Majority Leader Harry Reid, which would essentially extend the insurance for another two years, with some alterations in mind.
Hall also noted the importance of updating policies and procedures that can help banks ease into new compliance standards and ensure staff members are properly trained. Updating systems to comply with new rules may be costly, but implementing these procedures early can help institutions avoid processing errors and potential compliance violations, both of which may impose heavier costs and reputational damage.
Finally, community banks are encouraged to assess the level of risk they are exposed to and seek out solutions to reduce these vulnerabilities. As regulations become more defined in 2013, it's important for institutions to take steps to defend their profitability and shield themselves from unnecessary risks.