REPORTING CREDIT DECISIONS THAT USE COMPLEX MODELS/ALGORITHMS • Lenders using AI, machine learning and/or complex credit models must disclose the precise reason(s) for credit denials as required by the Equal Credit Opportunity Act. Adverse action notices also must be timely and provide accurate reasons for denial, as mandated by current requirements.
OVERSIGHT OF BANK THIRD-PARTY RISK MANAGEMENT • Vendor/third-party relationships are generating renewed regulatory scrutiny, especially fintech partnerships. Ineffective TPRM could be cited as unsafe or unsound practice. Banks must demonstrate TPRM through documentation of third-party relationships, conduct audit and performance reviews, and require third parties to provide data that confirms the quality and sustainability of controls to meet service agreements.
WHAT’S AN APPROPRIATE CHANGE MANAGEMENT STRATEGY FOR COMMUNITY BANKS? Each regulatory scenario described warrants a course of action specific to that issue. For example, regarding the enhanced consumer privacy laws, banks should revisit privacy disclosures, notices and policies within the states they operate.
On a broader scale, it would be prudent for banks to use the following strategies to successfully manage the collective number of impending regulatory changes.
1. Stay informed of changes through industry groups and trade associations. Seek clarification and/or assistance from trusted partners outside of your organization. In addition, involve your operations, technology and compliance staff to gain a comprehensive view of any potential changes. It also is prudent to communicate with your board and senior staff and to document your regulatory discussions in board minutes.
2. Designate an internal stakeholder to implement/ monitor regulatory changes. In addition to participating in the activities previously discussed, this individual can conduct testing aſter implementation to ensure the process and related controls are operated as intended. It is imperative for this stakeholder to document your bank’s change management efforts for subsequent review by external parties.
3. Partner with an external regulatory expert. Given the scope of impending legislation, banks may want to simply outsource their regulatory practice to an external provider. Staying current with newly implemented and/ or potential regulations requires time, expertise and deep industry knowledge. An external overseer can advise on necessary regulation and compliance issues, giving banks the freedom to focus on serving their communities. In addition, hiring an external partner may be a cost-effective solution for smaller banks that do not have the resources to maintain or support a compliance function.
Scan for More Information fom BHG on Compliance & Regulatory Solutions
As chief regulatory relations officer for BHG Financial, Gale Simons-Poole expertly navigates regulatory and compliance matters for BHG lending programs and supports BHG’s risk management and reporting. Her three decades in bank supervision include 23 years with the Federal Deposit Insurance Corporation, most recently as deputy regional director, risk management supervision. For more information, visit https://
lp.bhgandbanks.com/bank-network/. BHG is a MBA associate member.
THE MISSOURI BANKER 23
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32
