Navigating the Regulatory Landscape: What Community Banks Are Doing to Stay Compliant

| November 20, 2023 | By

Community banks are highly regulated. This is a good thing. It keeps entire communities safe from unwanted events such as fraud, scams, unfair lending practices, and bank failures.

Enforcing high-quality protection and compliance takes a lot of work. Your community bank does a lot behind the scenes to ensure a good experience for you. Right now, banking regulations are evolving, which makes staying compliant even more necessary—and even more of a challenge.

Understanding the Regulatory Landscape of Community Banks

Banking regulations are detailed and complex, and they usually contain a labyrinth of cross-references and footnotes typed up in surprisingly tiny text. 

To help you avoid having to delve through lengthy regulatory documents, here’s a quick FAQ to get you started: 

What is regulatory compliance in the banking industry?

“Regulatory compliance” refers to the act of adhering to the rules set by a board that oversees your actions. In the banking industry, these rules are important for protecting assets and ensuring financial resilience (two of the things you likely go to your bank for in the first place). 

When a bank is compliant, it has a strong defense against unexpected financial storms. It also fosters a sense of trust. And, when all of the banks in our financial system are compliant, that ensures that the financial system as a whole is stable. 

What are the regulatory controls for banks?

Two of the regulations that banks need to follow are the Community Reinvestment Act (CRA) and the Equal Credit Opportunity Act (ECOA). The CRA encourages banks to meet the credit needs of their entire communities, and the ECOA prohibits lenders from discriminating against credit applicants. 

How does the banking regulatory landscape affect you—a customer at a community bank? 

If you’re a customer at a compliant community bank, you can be confident that your deposits are protected, you’re receiving fair treatment, and your bank is operating in line with financial stability best practices. 

In short, banking regulations should give you peace of mind. 

Key Strategies Community Banks Employ to 

To stay compliant amid today’s regulatory landscape, your bank may roll out several strategies. They may:

Implement robust compliance management systems.

Staying informed about evolving banking regulations, implementing compliance, and continuously checking in on that compliance is a full-time job! Your bank likely has a department or team dedicated to implementing strong compliance management, monitoring compliance, and proactively addressing any possible risks. 

Prioritize ongoing staff training and education.

To keep up with new regulations and updated industry best practices, your bank will prioritize continuous training for its staff and its community. This helps ensure that your bank and its customers know how to keep themselves and their assets as safe as possible. 

Hold regular internal audits and external reviews.

To make sure that a bank is following regulations closely, a bank might implement both internal audits and external reviews as a chance to test themselves, pinpoint potential areas of concern, and guide any needed improvements. While an internal audit may cover these needs, inviting an external party to review a bank’s compliance offers an additional layer of validation. 

Addressing Challenges in the Regulatory Landscape

While your community bank is more than up to the task of staying updated and compliant, it isn’t easy to make that happen. As the tech behind fraud becomes more sophisticated, banks—now more than ever—need to focus on keeping their customers and communities safe. 

Two particularly pertinent challenges are: 

  1. Regulatory complexity: The CRA, ECOA, and related regulations are intricate. Each time they get updated, the complexity of staying compliant and ensuring compliance even amid transitions increases. Banks must frequently upgrade their systems and methodologies, which often comes with strains on a bank’s time and resources. 

  2. Cybersecurity concerns: Ransomware, phishing, and distributed denial-of-service attacks are happening more and more frequently, and, unfortunately, they often target banking institutions. With these cybersecurity threats looming, banks must adopt comprehensive risk management practices. The U.S. Department of Homeland Security’s Cybersecurity & Infrastructure Security Agency has a Shields Up program that helps organizations mitigate cyberattacks. To stay secure, banks need to prioritize remaining informed and compliant at all times.

Want to Know That You’re Banking with a Bank That’s Compliant in Today’s Regulatory Landscape?

When you’re selecting a bank, you want to have confidence that you’re going to have a good experience with any financial services you pursue. And, of course, you need to know that your money is going to be safe. 

At BNC National Bank, we’re proud to invest in strong regulatory compliance management, support, and training. We embrace a proactive approach so everyone we serve feels secure as a part of our community. To enhance that security, we don’t allow our support to stop at just financial services. We support our local community members in many other ways, too, so we can truly be good neighbors and a go-to resource when needed. 

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