Bankers need to radically restructure their compliance programs if they hope to stay out of legal trouble during the coming decade, according to consultant Jo Ann Barefoot.

"We have never before faced as many risks or as complex risks," the director of KPMG Barefoot Marrinan said this week. "We all need to be prepared to make changes to come to grips with them."

Addressing the American Bankers Association regulatory compliance conference on Monday, Ms. Barefoot said technology is advancing faster than regulators can write new rules. Also, supervisors are hampered in their rule writing by the political debate over the proper role of government oversight. The result is that banks no longer can rely on regulators to provide clear guidance, she said.

Banks need to adopt a six-point compliance strategy to adjust to this new realty, she said. Topping her list: ethics. Ethical banks will treat consumers fairly, rather than trying to take advantage of lax rules to make more money, she said. Banks also should automate compliance functions as much as possible. For example, the same computer that produces loan information should also spit out the Truth-in-Lending warnings.

She said banks must identify and measure risks, transfer compliance responsibility to front-line employees, invest in training programs, and outsource some monitoring functions to experts.

Some compliance officers will resist the change from a rule-based system, she predicted, but institutions that don't adapt will be nailed with fines and lawsuits. "We are on the threshold of a wrenching transformation," she said. "It is going to be very hard to deal with."

Some bankers are getting her message.

"This is where we are heading," said William J. Sarvey Jr., assistant vice president for consumer loan compliance at CoreStates Bank in Reading, Pa. "We have to build compliance into our systems."

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