When first introduced to the term “heightened expectations”, my mind immediate went to Wuthering Heights and Great Expectations. This new term from the OCC is anything but romantic and literary, but instead a new era of banking compliance that will affect the landscape of compliance. Think of the new push from the Office of the Comptroller of the Currency (OCC) as an infomercial. Just when you thoughts that there couldn’t be any more governmental oversight in the banking regulatory compliance world- WAIT! THERE’S MORE!
The OCC finalized a rule in September 2014 that focuses on a more structured risk management system for banks that is separate from parent organization. The OCC’s main concern is “protecting the national bank charter through stronger risk management governance and oversight. With the publication of five foundational rules, the OCC is requiring banks to involve organizational and board involvement changes that will aid in supporting the adoption of a risk governance framework.
So what are these five heightened expectations of banks now?
- The board of directors of a bank to preserve the “sanctity of the charter” by ensuring that the bank operates in a safe and sound manner rather than simply as an extension of its parent bank holding company and other group affiliates
- Banks will have a well-defined personnel management program that ensures appropriate staffing levels, provides for orderly succession, and provides for compensation tools to appropriately motivate and retain talent that does not encourage imprudent risk taking
- Banking leadership to define and communicate an acceptable risk appetite across the organization
- Banks to have reliable oversight programs, including the development and maintenance of strong audit and risk management functions
- Board of directors to be willing to provide credible challenges to management’s decision-making
This new expectation standard will require the restructure of many risk management departments, as well as the documentation of policy, procedure, risk appetite, and staffing plans.
While regulation keeps changing, often, the staffing levels at these organizations do not. West Monroe Partners is knowledgeable, prepared and ready to assist our banking clients with the management of implementing heightened expectations responses!