Bankers need to convert their compliance officers from traffic cops looking for technical violations to managers controlling for risk, according to industry officials.
"Compliance officers have got to change their mindset," said Greg Pitzer, senior manager at Arthur Andersen & Co. in Los Angeles. "Their jobs are getting bigger and bigger as more banks are dealing with risk management. Now they have to plan and manage compliance risk across all business units and products."
Observers said banks can take three steps to smooth the transition for their compliance staffs.
First, educate officers about risk-management theory, teach them more about their bank's overall business approach, and use top management to reinforce the message that compliance officers are pivotal to the risk- management process.
Stephen A. Kase, general counsel at Baylake Bank in Sturgeon Bay, Wis., said some compliance officers still aren't convinced that adding risk management responsibilities to their job description is prudent, though much of the industry thinks otherwise.
"A lot of compliance officers are resisting being converted into planners," Mr. Kase said. "It takes a different breed to be a risk manager rather than a bookworm."
Making that conversion requires training, said Diane Casey, national director of financial institutions' regulatory issues at Grant Thornton, a Washington-based consulting firm. She said bankers should send their compliance staffs to conferences where they can learn about risk management theory and discuss it with their peers.
They also should attend conferences sponsored by the regulators, she said. For example, the Federal Financial Institutions Examination Council conducts seminars on the new risk-based exams.
The second step requires compliance officers to meet with people from each department to learn about the bank's overall business plan, according to Tony Pallante, executive vice president at Avondale Federal Savings Bank in Chicago. This will help compliance officers shift from their traditional role of putting out fires and plugging holes to becoming decision makers, he said.
Finally, top management must support the conversion concept and actively encourage the compliance staff to become more involved in the daily operations of the bank, Ms. Casey said.
"The push for change can only come from the very top," Ms. Casey said.