Compliance Insight with David Schneier

Smaller Institutions Make the Community Connection

When I started scanning through my notes from recent conversations and interviews with our clients, I came across multiple references to Check 21 initiatives, concerns about getting vendor management and Red Flag programs up to regulatory expectations and addressing comments/observations from recent exams. In regards to loan portfolios, cash management and credit lines, I've heard very little -- almost nothing in terms of concerns or issues. I always feel obligated to point out that we work primarily with community banks and credit unions, not exactly the (former) titans of Wall Street. But still these institutions are the heart and soul of personal banking for the masses. And their concerns about the economy are of a personal nature, not professional.

These smaller institutions are run differently from the larger institutions we keep reading about in the paper and online. Their management lives within the communities they serve. For credit unions, many of the CEOs, CFOs, CIOs and so on have been working at the same place for decades and feel like they know most of their members (and many actually do). There's a vested interest in how they carry out their jobs and protect their members' best interests because they often have to look these people in the eye. They shop at the same stores; their children attend the same schools, they live on the same street.

I've always thought my money was safer in the hands of George Bailey than Mr. Potter, anyway. 

I recall speaking recently with a credit union executive who was responsible for consumer lending, and we talked about a recent application for an auto loan. This person knew that the applicant drove nearly 100 miles roundtrip every day to work, and was buying a car that was not exactly known for its fuel efficiency. The loan manager shared thoughts with the applicant, who ultimately decided to buy a different car that was both a little cheaper and achieved better mileage per gallon. Whether or not the decision changed because of the conversation is unknown; but it made me think how neat it would be to conduct business with a financial institution that can successfully move beyond a completed application and some numbers and connect with the people involved.

That's what credit unions and community banks often do. They tend to think locally when making decisions, and know what makes sense for their members/customers. That's why I wasn't' surprised when conducting a very brief, very basic survey this morning. I visited websites of the last four institutions I personally did fieldwork for, and then the four largest banks I keep reading about in the news (and one of which I use). All four of my clients had big, noticeable announcements about their FDIC coverage, and one even displayed verbiage about the increase in the insured amounts from $100,000 to $250,000 (until December 2009) prominently displayed on their home page. The other four banks? Only one of them had anything easily viewable about their FDIC coverage (and not prominently displayed), and the rest looked much the same as they did six months ago with no specific message about the current crisis. The smaller guys know what's on the minds of their depositors and acted swiftly to assuage concerns. They didn't wait for a formal website redesign (trust me, some of these sites were updated on the fly with little concern for esthetics or branding) to get the message out: "Your money is safe with us".

Is your money safer with the local credit union or community bank? I don't know. But in times such as these, there's some real value in working with an institution that has a relationship with its customers and/or members and sees the people behind the deposits and loans. And as I mentioned earlier, they continue to be focused not on acts of self-preservation, but rather on the day-to-day demands of managing a financial institution. Those who know me will say I'm heavily influenced by my lifelong enjoyment of the movie "It's a Wonderful Life," but I've always thought my money was safer in the hands of George Bailey than Mr. Potter, anyway, and so this logic appeals to me.

I'd like to hear from our audience and find out what your thoughts are on the subject.

About the Author

David Schneier

David Schneier

Director of Professional Services

David Schneier is Director of Professional Services for Icons Inc., an information security consultancy focused on helping financial institutions meet regulatory compliance with respect to GLBA 501(b) and NCUA Part 748 A and B. He has over 20 years' experience in Information Technology, including application development, infrastructure management, software quality assurance and IT audit and compliance.

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