CEDAR RAPIDS, Iowa -- A dozen years in the compliance business has given Roy Karon this insight: You need to teach not just tell - bankers how to adhere to regulations.

Mr. Karon, 52, owns BVS Performance Systems, which sells multimedia software and interactive videos that explain how to comply with a range of rules.

Rooted in teaching, BVS offers 102 courses, which customers check out much the way they would a library book.

The company's philosophy is; Don't ever sell anything to anyone who doesn't need it, doesn't want it, or can't use it.

Sound too good to be true? Not unless 1,100 banks that use BVS products are wrong.

Training Package

When BVS's customers, which are 90% community banks, check out a course, the company sends it a package containing a video, CD-ROM, or computer disks, a manual, and quizzes for bankers to test their compliance knowledge.

Most bankers take one to four hours to complete a course. After a bank has trained all the employees involved in compliance, it returns the video or disks to BVS.

Of the 102 total, 19 courses are devoted solely to complying with banking regulations. BVS offers compliance help on everything from fair lending to Truthin-Savings. The other lessons teach bankers everything from how to market a product to how to handle a difficult customer.

The cost is based on how many courses the bank takes out. The average cost is $200 a month, and clients must sign a 24-month contract. Mr. Karon said BVS has a 75% retention rate, and that most of the lost customers are victims of mergers and acquisitions.

BVS's newest product is called the Ultimate Compliance Service, released in February. Just 15 banks have bought the new software, but BVS has big plans for the product. The Ultimate Compliance Service is designed to help customers track compliance.

The software asks bankers a series of yes-or-no questions. If the user's answer indicates the bank may be violating a regulation, the computer flags it and asks the banker to explain his answer on the screen. Those notes can be helpful in explaining a bank's actions to examiners, Mr. Karon said.

The product also assigns a risk rating from 1 to 10 to each possible violation. That way, bankers can prioritize problems.

Mr. Karon said most of his current customers will probably buy the service. He expects to have a thousand of the new products in place in the next two to three years.

BVS has a team of six people who call customers every month to make sure they are using the product correctly.

"The computer doesn't look at the applicant and fill out the form," he said. "It's not the system, it's the people."

Although he said videos give a good overview, Mr. Karon now prefers to teach compliance through Windows-based computer software because it is interactive. Users have to make choices and answer questions, so they learn more, he said. Customers can choose either format.

Sound is the newest medium for BVS's software products. Although Mr. Karon admits the banking industry isn't quite ready for complete multimedia, he's excited about the possibilities.

While BVS is clearly leaning toward more computer products, Mr. Karon still has an attachment for video production from his years as a news producer.

Venture Fizzles

In 1975, Mr. Karon, then the news director for the CBS affiliate here, became disillusioned with what he called "happy news" - the degeneration of hard news.

He borrowed $2,500 on his life insurance policy, and started Videa, which produces in-house training videos for companies like Rockwell International and John Deere.

Videa did well, but it hit the financial skids when most of its clients downsized in the early 1980s. "They canceled all their contracts," said Mr. Karon. "We still had a lot of capacity but nothing to do."

When he was trying to figure out his next step, a friend asked Mr. Karon to create a video explaining individual retirement accounts to bank employees.

That's when Mr. Karon realized the banking industry was a largely untapped market. "In the Midwest, there are banks on every street corner," he said.

Bulk of Revenues

Formed in 1982, BVS is a Videa subsidiary that was just a sideline business until three years ago. When regulatory scrutiny of banks mushroomed, so did demand for compliance help. As a result, BVS now accounts for 75% of the entire company's income. With a staff of 35, Videa brought in $2.3 million in revenue last year.

As BVS became more successful, Mr, Karon said he realized it needed the expertise of a banker.

In February, he hired Gary Peterson, 50, president of a local bank, to be executive vice president of BVS. Mr. Peterson has 25 years of experience in banking, including four years as a Federal Reserve Board examiner.

The duo believe that constant training is the key to compliance success.

The banking industry is changing so quickly that it's hard to keep up, Mr. Karon said.

"If you knew banking two years ago, and then left it, you don't know it now."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.