Many bank CEOs have shared with me an uncertainty regarding the efficiency and effectiveness of their existing compliance program. This extends to the palpable pressure they feel to increase compliance resources. But they are not always sure those resources are worth the cost.

Without question, the regulatory, financial and reputational risk of noncompliance is always greater than the expense incurred in securing adherence to regulatory requirements. However, there is still a need for balance. A "compliance at all cost" mentality, which is the overarching attitude in many banks, results in overspending and overallocating valuable resources to meet both real and perceived compliance standards.

After the financial crisis, I noticed that most banks' compliance costs increased by nearly 50%, without appreciable growth in core loans or deposits. While taking such extreme measures was understandable post-crisis, it doesn't make the same sense today. Regardless of size, community banks simply cannot afford to increase compliance spending even 10% to 15% a year, which is an actual spending goal for some banks. This is an alarming trend.

Overcompliance is undoubtedly hurting customer service, culture and the bottom line in banks of all sizes throughout the country.

There are three key drivers that separate the most efficient compliance performers from the rest: strong culture, bankwide accountability for results and continuous measurement of performance. But assessing the performance of these drivers — particularly a bank's compliance culture, which is difficult to change — is often more art than science.

Using a simple gauge to determine an organization's general attitude toward compliance is what I recommend as a first step to those executives seeking to understand their bank's compliance efficiency. Executives should determine, of the following pairs of statements, which are more likely to be heard among their staff:

"Risk management is at the heart of what we do because we are risk managers," or "Compliance is an overbearing waste of time and money."

"Compliance is a valued member of the new product design team," or "Did anyone run this by compliance?"

Those banks that cultivate positive beliefs and attitudes toward compliance will realize more efficient and effective results, as evidenced by fewer customer complaints, disputes, regulatory infractions, internal and external disciplinary actions, as well as less regulatory scrutiny. It is always wise for executives to remember that the attitude toward compliance expressed at the top quickly reverberates throughout an entire organization.

I define accountability as, "The buck stops here." When working with banks, I commonly hear line-of-business employees respond to questions about their compliance role with, "Compliance, I don't do compliance. That is so-and-so's job." This type of response and general attitude is a true indicator of a lacking cohesive culture and lacking accountability for results, which can be the downfall of any banking organization if not proactively addressed.

Community banks that hold the first line of defense — business line employees — accountable for compliance tend to have a lower holistic compliance cost. This is not to imply that all staff must be compliance experts, but every individual must be accountable for executing his/her job function with the applicable regulatory knowledge. As an example, employees reporting customer information to a credit bureau are accountable for ensuring the information complies with all the data furnisher requirements of the Fair Credit Reporting Act.

A bank will also achieve efficiency in its compliance program by measuring the progress of both the institution and individuals in meeting the bank's compliance goals. Unfortunately, it is not the status quo for community banks to track or report on the workload of the compliance function, and this must change for those truly interested in improving efficiency. Macro- and micro-level metrics are undoubtedly an invaluable tool for banks seeking performance improvement. Macro-level metrics provide a big-picture view of a bank's efficiency, while micro metrics are utilized to manage performance of functions, processes and units of activity.

Banks with up-to-date reviews of their back-office processes and technology systems can use data to actively monitor the compliance culture, accountability and compliance metrics on a continual basis. They will benefit from a more efficient and effective risk-based compliance model, which meets the truly worthwhile compliance standards, not the perceived ones. One hundred percent compliance should be a bank's goal. But 150% compliance is wholly unnecessary and extremely draining of a bank's resources.

L. T. "Tom" Hall is president and CEO of Resurgent Performance, a bank performance advisory firm.