NEW ORLEANS - Realizing that compliance officers, auditors, and security people must work together to ensure a bank is safe and sound, the Bank Administration Institute held a conference last week to address the needs of all three.
About 1,200 bankers gathered in New Orleans for BAI's confab, whose theme was "Restructuring for the Future."
For three days, bankers could select from concurrent sessions on compliance issues such as changes in the Bank Secrecy Act or imminent nondeposit-product regulations. Audit topics included controlling internal fraud, and a security session discussed preventing robberies.
The keynote speaker was E. Michel Kruse, senior executive vice president of Chase Manhattan Corp., who warned bankers against picking up any bad habits while visiting Bourbon Street.
"Sobriety and alertness are at all times indispensable in managing risk," he said.
On a more serious note, Mr. Kruse challenged his audience to become better competitors through technology. "We have to dramatically change the way we run banks in order to be relevant in the next century," he said.
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Those at the conference had a chance to quiz their regulators on compliance issues.
James Francomacaro, a compliance review examiner with the Federal Deposit Insurance Corp. in Memphis, advised bankers to geocode loans that are granted or denied.
"You have to know where your loans are going," he said.
Mr. Francomacaro suggested bankers make counteroffers before rejecting a loan application. For example, if a bank can't lend $2,000, ask the borrower whether he wants $1,500.
Low loan volume - less than 50% of assets - tips off regulators that a bank is not properly investing in its community, according to Mr. Francomacaro.
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Combating financial crime just got cheaper.
The New York Clearing House Association is reducing the price on its training video, released last September, to help bankers catch money launderers.
The original price tag of $10,000 - which included a master tape so an institution could make unlimited copies - was too steep for some banks. So the association has produced two more limited versions.
For $1,500, a bank can get one nonreproducible copy of the video and 14 diskettes with training material that can be customized to meet an institution's own needs. For half that price, a bank can get the video and a printed version of the training material.
"I have taken that film all over the world," said Jane L. Wexton, a vice president at Citicorp, during her presentation on payment systems fraud. Citicorp has translated the clearing house's materials into Spanish and Mandarin and has plans to add German and French.
"It's a bit of a horror show," added John Fleming, senior vice president at National Westminster Bank, during a compliance roundtable for money- center banks. "You watch that, and you want to go into another business."
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First Chicago Corp. may set up a hotline for its 4,300 employees to make anonymous reports of lending discrimination, according to James Brankin, a vice president. He told the conference that banks must manage the fair- lending process - not simply react to crises.
Andrew L. Sandler, a lawyer at Skadden, Arps, Slate, Meagher & Flom in Washington, D.C., agreed. Banks ought to be testing themselves for lending bias, he said.
"An institution has to do self-evaluation because it's the right thing to do," said Mr. Sandler, who represented Chevy Chase Federal Savings Bank in its landmark fair-lending settlement with the Justice Department. "But it's important to do it right."
Self-testing should be done through the bank's legal department so the results can be protected under attorney-client privilege, both men recommended.
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The government will bring more lawsuits to fight lending bias, according to Paul Hancock, chief of housing and civil enforcement in the Justice Department's civil rights division.
"We are receiving an increasing number of referrals" from regulators, Mr. Hancock said during a panel discussion on fair lending.
The new cases will focus on loan pricing, he said. The agency also will continue evaluating banks' marketing and underwriting.