Training is not a Luxury Item!

It happens every time economic downturns come to the fore. Businesses look at their operating expenses in search of areas to cut. Expense items that are seen as superfluous or non-essential are significantly reduced or cut entirely from the operating budget. Unfortunately, training of staff is often at the top of the list of items that are viewed as easy to cut. The arguments for cutting training are easily recognizable. “The cost of traveling doesn’t justify the result.” Or, “We can put that off for a year or two without much trouble.” In addition, to cost concerns, training is often seen as a luxury that is nothing more than a boondoggle for employees.

Nowhere is this truer than in the banking industry. Today, with profits in question throughout the industry as the economy continues to shrink, banks are looking for ways to cut costs. However, as the budget axe continues to look for potential places to cut, please do not consider your training program to be non-essential! The regulators will not like it and you may ultimately do more harm than good!

Training as an Essential Part of a Compliance Program
Since regulators first embraced the risk-based approach to supervision of banks, training of staff was recognized as one of the pillars of a strong compliance program. In its 2002 article entitled A Banker's Guide to Establishing and Maintaining an Effective Compliance Management Program, the Kansas City Federal Reserve Bank discussed the importance of training to a compliance program:

“The importance of having a staff that is knowledgeable of regulatory requirements cannot be overstated. Regardless of an institution's philosophy and policies, ultimately it is line staff who process transactions and interact with customers. If employees are not adequately trained in compliance matters, errors are certain to occur” [1]

Mark W Olson, Member of the Board of Governors of the US Federal Reserve System, also emphasized this point in his remarks at the American Bankers Association's Regulatory Compliance Conference, Orlando , June 12, 2006. He stated in part that:

“Training on policies, procedures, and associated controls is a component of compliance-risk management that should not be overlooked. Examiners will determine whether the banking organization's training program ensures that compliance policies, procedures, and controls are well understood and appropriately communicated throughout the organization. [2]

These two ideas make it clear that training of staff is not only important, but that is an essential component of compliance. There must be a mechanism in place to make sure that everyone associated with your bank is kept abreast of changes to regulations that directly impact the operations of the bank. In addition, when management and staff have a clear understanding of the requirements of regulations, they are more effective and efficient in compliance. While good training will not make up for unsafe and unsound practices, a well trained staff can cover a multitude of “ sins”.

Training Can be a Cost Saver
In the area of compliance, the most frequent violations of regulations are a direct result of either misunderstanding the requirements of regulations or ignorance of changes to regulations. [3] Training courses that cover the requirements of consumer regulations are extremely effective in reducing these kinds of violations. While compliance violations rarely result in the closure of a bank, the fines, penalties and reimbursements that result can have a drastic impact on the profitability of a bank.

In many cases, when regulatory changes occur, changing the bank’s policies and procedures to reflect the changes can take time. In the meantime, a well-trained staff and management can immediately effect the changes that are required by new regulations , and can be mindful of forms, documents, disclosures or other materials that are out of date or are not in compliance.

Various Forms of Training Classes
Today there are many options available to the cost-conscious bank that wants to provide training. On-line courses, classes delivered by vendors, and even regulatory agencies all have developed various training courses at affordable prices. With a minimum of research, it is possible to find various forms of training that can be tailored to the educational and economic needs of your individual bank.

Do not Give Training the AxeEven in the toughest of economic times, training of staff and management is a necessity. Through training courses that are specifically designed to meet the needs of individual organizations, banks can be prepared to meet the challenges of a changing regulatory environment. As one of the most important pillars of a strong compliance program, training should never be considered a luxury!

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[1] A Banker's Guide to Establishing and Maintaining an Effective Compliance Management Program (the Guide). Federal Reserve Bank of Kansas City , 2002

[2] Remarks by Mark W Olson, Member of the Board of Governors of the US Federal Reserve System, at the American Bankers Association's Regulatory Compliance Conference, Orlando, 12 June 2006.

[3] For a list of the most frequent consumer violations, see A Banker's Guide to Establishing and Maintaining an Effective Compliance Management Program Kansas City Federal Reserve Bank 2002