A host of new bank regulations are piling up in the wake of the mortgage meltdown and the growing list of bank failures.
Big banks like Wells Fargo & Co. and Bank of America Corp. have well-staffed compliance and training departments that do nothing but keep track of all the new rules and carry them out.
The regulatory burden is tougher, though, for community banks, whose compliance officers often wear multiple hats.
"You don't get to duck anything because you're small," says Nevada Bankers Association President and Chief Executive Officer Bill Uffelman. "Community banks still have to do the same things the big guys do."
Among new regulations are new mortgage lending rules that went into effect this year requiring earlier disclosure of loan costs and longer home loan decision-making times for consumers. In addition, new home valuation rules let only lenders rather than real estate agents or mortgage brokers deal directly with appraisers. More mortgage settlement requirements are on tap for next year.
Congress, meanwhile, is considering legislation to restrict overdraft fees that banks charge consumers when they overdraw their accounts. The proposed law would limit how much and how frequently banks can charge the fees, and would require that customers opt-in for overdraft protection.
And the Obama administration wants a Consumer Financial Protection Agency, another regulatory layer for banks. A proposed amendment would exempt banks with assets under $10 billion from examination by the new agency, yet the new regulator still could have some power over smaller institutions by demanding to participate in examinations in some instances.
These recent and proposed changes are on top of many others that have gone into effect in the last couple of years.
Two years ago, for instance, the Nevada Legislature passed a law requiring banks to train tellers to spot elder abuse.
And every year the federal Bank Secrecy Act gets more specific with new provisions, says Jack Buchold, executive vice president and chief financial officer of Nevada Security Bank. That law, created in 1970, requires banks to report certain transactions to prevent money laundering. Now banks also have to collect more information from customers opening accounts, including verifying their addresses. That can be challenging in Incline Village where most residents have post office boxes rather than street addresses. Fortunately, Buchold says, the bank's staff members know their customers well.
In addition to following new rules, community bank tellers are also having to field tough questions about complex industry issues. Customers want to know, for instance, what happened to all the bailout money for banks.
Even though their bank wasn't involved, Buchold says, "Tellers need to be able to answer."
Some of the new regulations don't impact banks equally. A lot of smaller banks, for instance, aren't in the residential mortgage business, yet they're still affected by the changes when they issue home equity loans.
Bearing the cost of keeping up and complying with new rules is tougher for community banks because they don't have the scale of the large banks to spread the cost of training over thousands of employees, Uffelman says.
"Any new regulation is more costly to the bank," says Heritage Bank of Nevada President and CEO Stan Wilmoth. His bank's compliance officer, who has other duties besides making sure the bank is complying with regulations, has spent 40 percent more time on compliance in the last six months.
"We will give it enough time to comply with all the new regulations brought down by the FDIC or Federal Reserve," he adds. "If we need extra staff in there, we'll do it."
Jim DeVolld, president of First Independent Bank of Nevada, part of Western Alliance Bancorp, says the biggest impact of the increasing regulatory pressure at his bank is growing oversight on decisions.
"Anything that impacts our company needs to have board approval. More things are going to our board of directors than before," he says. "Everybody wants to make sure if you go into a new line of business, you've completely researched it and are going down the right path."
The challenge is not just complying with new regulations, but keeping up with what might come down the pike.
"I can't tell you today what the rules are going to look like tomorrow," Uffelman says. "I keep in constant communication with our members, sending e-mails multiple times a week if not multiple times a day with changes. The last thing you want to hear is someone say, 'I didn't know that.'"
For community bankers, it's a whole new world.
"It was an awful lot more fun to be a banker three years ago - there's no question," DeVolld says.
Wilmoth says he sees opportunity in today's challenging environment.
"It's horrible to watch friends and neighbors struggle when they've lost jobs, but it's wonderful to be able to help them in this terrible time. Today you need a good banker."
