It is a significant comment on the state of the banking industry that Robert Morris Associates has found it valuable to develop a one-day seminar on "Compliance Management for Community Banks."

With topics like fair-lending, Home Mortgage Disclosure Act reporting, and CRA so important to community bankers today, the RMA has felt it will be able to fill two back-to-back sessions on these topics: one in Atlanta on March 20 and one in Chicago on April 10.

Of course, compliance is one of the biggest challenges facing this industry, which many think the government is trying to micromanage.

Major banks have long since established formal compliance policies. But community banks have been more likely to operate by the seat of the pants.

Often their managers honestly feel there is little or no problem in their territories.

When a visiting regulator asks the CEO about the bank's CRA policy, the answer is likely to be:

"We don't have any underprivileged people in town."

Or "we subsidize the loans for the few long-time residents who can't afford their mortgage payments."

Many bankers complain that examiners focus less on lending policies than on compliance bookkeeping. "It seems as if the regulators are more interested in the attention we give to the files than the attention we give to the community's needs" is the way it's been put it to me.

But such complacency is neither warranted or accepted.

Compliance is far more complex than keeping files of data on loans issued.

As the Boston Fed pointed out in its recent and highly controversial study of compliance procedures, the causes of discrimination are often unintended policies reflecting unexpressed attitudes.

As an example it cited the fact that the mortgage application files of minorities are often slimmer than those of other applicants.

This indicates that lending officers go out of their way to try to make the "establishment" borrower's request bankable - by suggesting collateral, cosigners, and the like - but that they go by the book with minority applicants.

How can you be sure you're in thorough compliance? Some compliance officers say the answer is simple:

"Treat everyone the same way. If you want to be a curmudgeon in lending to anyone, be that way for everyone."

I hope the RMA makes this sort of suggestion in addition to explaining the nuts and bolts of fulfilling the requirements of the laws and regulations.

What makes bankers so mad when they are criticized over lending policies is that the critics rarely have a clue about what banks really try to do.

Banks don't want to have to turn down borrowers.

For one thing, it's costly; banks spend time and effort in handling and evaluating loan application.

But bankers know that even if they earn 1% on assets, it takes the returns on 99 good loans to offset the losses on one that goes sour. Pushing the credit envelope can be very expensive.

And bankers also know that at the same time the CRA regulators want the bank to be generous, the other regulators and examiners - who watch soundness and capital - want the bank to be cautious.

"Make up your minds and be consistent," the banker pleads.

Such consistency isn't likely to come soon. I hope the RMA's program will help community bankers adjust to this fact.

Don't expect the regulators to do the adjusting.

Mr. Nadler is a contributing editor of the American Banker and professor of finance at the Rutgers University Graduate School of Management.

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