It is highly likely that in your upcoming regulatory exam is there will be something that you are not 100% prepared for. As all of you have experienced and as we see every day working with clients, something new to the institution is nearly always brought up. However, there are some best practices that you can capitalize on for making this preparation less painful.
1. Be Prepared
Yes, the scout motto is your number one best practice for preparing. Live your lives in a prepared state. Have controls in place; reporting, processes, checks and balances, etc., that allow you to not scramble for the question of “show me how you do this.” question. We recommend that you have at a minimum the following reports ready to share:
- Concentrations by credit tier, MDPA (Real Estate showing LTV’s and Credit Scores in a cross matrix)
- Line of Business concentration reporting
- Trending of loan quality (ltv’s/scores), and
- Lastly a view of new loan origination by credit tiers and Line of Business concentrations.
2. Stay Informed of Industry Changes
This is not easy, you do not likely have the time or resources to spend time figuring out what is being asked throughout the year. However, it is important for you to reach out to forums, groups, peers, etc. to have a feel of the “flavor of the month”. VE is fortunate be in touch with hundreds of institutions and listening to what is being asked of our clients on a weekly basis. As real estate values are rebounding, we are seeing heavy scrutiny in indirect lending.
Well defined ownership and accountability within an organization is critical to a successful exam process. Knowing who is responsible for the controls within your organization will save you a ton of time over “scrambling” for data once a request is received—see bullet 1. J We strongly recommend having a “point” person for your various analytical areas that is producing/monitoring controls on a monthly or at least quarterly basis.
At Visible Equity, we have the opportunity to work with clients all over the country in preparing for their exams in an ongoing basis. We see institutions that have amazing controls in place and we see others that are in pure scramble mode the week before examiners are scheduled to arrive. We love being ready to assist in these situations and we actually keep a calendar of “Examiners in the House” that our staff see so that we can be there for clients during this demanding time. If you haven’t already, please share with us when your examiners normally visit so that we can continue to work on pro-active approaches to reducing the stress.