The Daily Dividend

News, notes and insights from around the industry

JULY 18, 2018
FMS Webinar: How to Implement CECL While Avoiding Pitfalls
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

FMS Webinar: Strategic Implications of CECLIn our recent research we found that 58% of institutions find regulatory burden a challenge, and CECL is doubtless a substantial part of that burden. This paradigm shift will demand changes to models for forecasting expected losses and require institutions to access more historical data to calculate credit reserves.

To prepare for CECL, join us on Wednesday, July 25, for our latest webinar, “CECL: How to Implement While Avoiding Pitfalls”. Thomas Caragher of ZM Financial Systems will discuss what CECL means for data retention and storage, timelines and implementation concerns, long-term impact to lending decisions and more.

As always, this session is complementary for FMS members. (Not a member? Join today!)

JULY 17, 2018
Managing Fraud Risk
By Mark Loehrke, Editor, Financial Managers Society

Financial institutions are certainly no strangers to risk management – it’s pretty much at the heart of what they do, after all. But amid all of the attention being paid to things like interest rate, credit and cyber risks, it’s possible that other key risks are being downplayed or misunderstood in many organizations. 

A recent survey from Protiviti and Utica College highlights this potential problem by delving into the topic of white-collar crime and fraud risks. This global survey sought to measure organizational maturity by determining how well companies around the world are measuring culture, flagging warning signs, making control improvements, addressing gaps, building awareness of fraud and misconduct risk and, ultimately, avoiding the kinds of organizational breakdowns that can derail brand, reputation and long-term viability. Among the findings:

Many organizations continue to lag in employing leading practices to build a strong culture – the kind of culture that can help alleviate the potential for fraud

Resources represent a significant challenge in building a strong corporate culture with a clear fraud risk strategy – especially among smaller companies

Many organizations lack a fraud risk management program, including policies to mitigate fraud

Third parties often represent a significant gap in fraud risk management – a particularly troubling trend, at a time when so many institutions are working closely with third-party providers  
The last thing banks and credit unions need is another risk in need of precious resources, but one thing they need even less is fraud. Building a strong corporate culture is the first step to keeping that particular risk at bay.

JULY 16, 2018
The Value of Learnability
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

One of today’s most valued skills has a name that sounds made-up: learnability.

In fact, learnability is “the desire and ability to quickly grow and adapt one’s skill set” when it comes to your career, and a recent story from the Harvard Business Report lays out four tips on how to foster learnability within an organization in order to create a culture that’s intellectually curious and highly adaptive.


Incentivize learning
If you want your team to care about and pursue education and self-improvement, you should make it easy and rewarding for them to do so. Promote a learning culture by giving employees the time and resources to learn, and by fostering an atmosphere where critical thinking and assertiveness are encouraged.


Fine-tune feedback
To build a team of learners, leaders should become experts at giving constructive feedback. Manager critiques are often too focused on positives or negatives to be truly helpful, when in reality the most meaningful feedback involves pointing out blind spots and knowledge gaps.


Model learning
Leaders need to set the example of continued learning by having an open mind, taking a curious approach to work and making a substantial commitment to educating oneself. After all, no good leader should ask employees to do something he or she isn’t willing to do as well.


Require learnability
Focus on hiring people who have learnability in their skillset. While it can be learned, sometimes making it a requirement for your team rather than trying to develop it later on helps ensure that your organization is full of people who are innovative, curious and eager to adapt.

JULY 13, 2018
Breaking Blockchain Open
By Mark Loehrke, Editor, Financial Managers Society

Breaking Blockchain OpenBank and credit union executives have likely read plenty about the potential of blockchain to disrupt their industry in the coming years, but most of the stories have probably felt pretty far-removed from the day-to-day reality of what’s going on in their institutions in the here and now.

So a new global blockchain survey from Deloitte may seem like more of the same – a peek into the crystal ball that, while interesting in a future-tense sort of way, doesn’t really offer much to stir the pot today. But while even the survey’s authors admit that blockchain isn’t quite ready for primetime just yet, they’re also quick to note that the breakout moment is getting closer every day. And with so many of the respondents in the survey hailing from the financial services arena (23%), this may be one blockchain story worth heeding.


Indeed, one of the survey’s main findings is that blockchain is quickly moving from the realm of exploration and discovery to the more meat-and-potatoes work of actually using the technology to build practical business applications. Already, 34% of the survey respondents report that their companies have some type of blockchain system in production, while another 41% expect to deploy a blockchain application of some sort in the next 12 months.        


Even so, the survey also found that while many businesses believe in blockchain’s potential to disrupt and revolutionize their industries and the overall economy, a healthy percentage of respondents still believe that for all the talk about blockchain’s promise, there are very few active-use cases they can currently employ to advance their belief in the technology. The survey’s authors note that, because of this, a certain sense of “blockchain fatigue” has set in among those who feel its potential has been over-communicated, while its real-world benefits remain elusive. Still, based on what they see as blockchain’s likely adoption rate within the next three years, they strongly believe that organizations need to evolve their thinking around the technology.


In other words, even for businesses that may not see the technology as worthy of their attention or concern in the present day – such as, perhaps, many community banks and credit unions – it doesn’t hurt to learn and absorb as much as they can about blockchain now in order to be better prepared for the decisions and opportunities likely to come in the near future.

JULY 12, 2018
Coping with Compliance Costs
By Hilary Collins, Specialist, Publications and Research, Financial Managers Society

Recent FMS research found that while regulatory pressure is down for most in the industry, 58% of bank and credit union executives still found it challenging. Additionally, research from Accenture found that 89% of financial services industry executives expect that compliance costs will continue to climb over the next two years.

How can institutions best address these rising costs while also finding a way to improve performance? The answer is, of course, technology. But when technology is already such a large part of the budget, where can executives get the most bang for their buck?


Sage advice from Jim D’Arezzo says that upgrading the power and efficiency of your existing technologies might be the most effective strategy. Things like increasing network bandwidth or upgrading data storage or implementing an all-software option can help speed up processes without taking a long time to implement. While these upgrades aren’t free, they can reduce performance bottlenecks and help curb compliance costs in the long run.

JULY 11, 2018
FMS Research: Year over Year
By Mark Loehrke, Editor, Financial Managers Society

FMS Research: Year over YearOne of the great benefits of fielding a research study for a second consecutive year is the ability to compare data from the two surveys to identify potential trends and to see how things have – or haven’t – changed. That’s exactly what we’ve done for the first breakout piece from Community Mindset: Bank and Credit Union Leadership Viewpoints 2018.

In What a Difference a Year Makes: 2017 v. 2018, we dive into the data from 2017’s survey to compare it against the responses we received from this year’s group of 400 bank and credit union executives. What did we find?


M&A Movement

The M&A market seems to be heating up, with 64% of respondents identifying themselves as either prospective buyers or prospective sellers in 2018 – compared to just 50% last year.


Regulatory Reversal

While regulatory burden still rates as a significant challenge for most banks and credit unions in 2018, recent relief efforts seem to be having their desired effect, with the number of survey respondents characterizing their burden as reasonable in 2018 up by 18 percentage points from the previous year and those viewing the burden as a bit too heavy down by 13 percentage points for the same period.  


Mobile on the Move

Customers and members may still be logging on to much of their banking in 2018, but more and more are now doing so from their phones rather than their computers, with executives noting that online banking in their institutions is down by around 12%, while mobile is up by 7%.


These are just a handful of the fascinating comparisons to be found between our 2017 and 2018 data – be sure to check out the full story for a timely snapshot of the state of community banks and credit unions in 2018.

JULY 10, 2018
Regulatory Relief and HMDA
By Mark Loehrke, Editor, Financial Managers Society

Regulatory Relief and HMDAHow will recently enacted regulatory relief measures impact the Home Mortgage Disclosure Act (HMDA)? 

Several agencies have weighed in on this question, with the OCC, the FDIC and the CFPB all releasing bulletins and/or statements last week to clarify where things stand with HMDA. All three updates touch upon the Economic Growth, Regulatory Relief, and Consumer Protection Act and its introduction of a partial exemption from some HMDA filing requirements for smaller-volume banks and credit unions. In summary:  

The new law will not affect the format of the LARs for institutions filing 2018 data in 2019 – banks and credit unions with the partial exemption will simply enter an exemption code in fields they aren't required to complete.

With the exception of material data errors, the agencies will not require data resubmission for 2018 HMDA data reported in 2019.

The agencies don't plan to assess penalties for errors in 2018 data, and will instead focus their exams on diagnosing problems rather than penalizing lenders for them.

The CFPB is planning to release a revised filing instructions guide for HMDA later this summer.


Mark Loehrke
Editor and Director, Publications and Research

Danielle Holland

Hilary Collins
Specialist, Publications and Research