Pub. 3 2013-2014 Issue 3

16 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S and a half times greater for community banks than large ones. Money spent on compliance is money that cannot be loaned out to small businesses. The 6,900 community banks control $1.4 trillion in assets. That’s 11 percent of all bank assets in the country. They cur- rently have $257 billion in loans to small businesses and farms on their books. On the other hand, four mega banks—JPMorgan Chase, Bank of America, Citibank and Wells Fargo—control $5.4 tril- lion in assets, or 40 percent of all bank assets in the country. Given that they are nearly four times as large as all local banks combined, one might expect that they would have made four times the small-business loans, or about $1 trillion. In fact, these banks have a mere $85 billion in small-business on their balance sheets. The rules and regulations developed by the Consumer Fi- nancial Protection Bureau (CFPB) affect all commercial banks, regardless of size, and will have a disproportionate impact on community banks. The CFPB’s focus is on consumer protec- tion and has focused on groups such as pensioners, students and consumers who lack financial literacy. These are the types of customers that community banks serve, which means sig- nificant compliance costs increases that community banks will find harder to absorb. Many community banks have increased their staffing needs for compliance. An example of this is a 100 million dollar bank that, in 2006, devoted one half of an FTE to compliance cur- rently devotes one and a half FTE to compliance and expects to soon increase this to two FTE. That is a 400 percent increase in just employee cost. The cost of implementing the new rules and regulations, as well as committingmore staff to oversight in compliance, has increased pressure on the owners and directors of small banks to sell out to the larger banks. Smaller banks have been exempted from some of the new requirements, for example, the bigger banks are required to keep more reserves for losses. Smaller community banks that offer home loans in underserved rural areas are allowed tomake certain mortgages, such as balloon payments, that would come under greater regulatory scrutiny if underwritten by larger banks.  TOO BIG TO FAIL – continued Core Bank Processing • Managed Services • Mobile & Internet Solutions Payments Processing • Electronic & Print Distribution • Regulatory Compliance 888.494.8449 compliance.csiweb.com CSI’s WatchDOG® Social Compliance can help. Whether you’re active or passive on social media, you will soon need to have a compliance program in place. Our industry-leading solution gives you an easy to-use tool for approving and archiving posts, targeting searches, monitoring your reputation and analyzing the competition. csiweb.com/TheAnswer Are your social media efforts compliant today or prepared for tomorrow? Thanks to new proposed guidance, you can’t ignore social media any longer.