Once upon a time, bank employees who produced income for their banks were the employees who were well compensated. During the housing and lending booms, that meant producing loan officers with large “books of business” were compensated handsomely. After all, as the the old saying goes, “customers follow the banker, not the bank.” A banks earnings were directly tied to the work ethic and performance of business generators.
But as the American Banker reports, in this post Dodd-Frank world, the new compensation stars in banking, the spots head-hunters are working overtime to fill, are in compliance.
For those blissfully ignorant of what compliance personnel do for a bank, it’s best summed up as employees who make sure the bank follows the myriad of rules required of them and that this compliance is documented properly. None of this activity makes money for the bank, but instead is a road block to earning profits. A couple decades ago, there was no such thing as a compliance department in a small to medium sized bank. A decade ago, compliance might have been someone’s part-time job. Now, entire compliance fiefdoms are developing in even the smallest banks. And the race to hire qualified personnel is fierce.
“These are often senior hires,” says Jeanne Branthover, a managing director at Boyden Global Executive Search. “Banks are having to pay more for the right talent, often 50% to 100% more if they want someone to manage it.”
The rising demand for personnel could have another side effect that could benefit certain existing employees. “Give your compliance officers a raise,” suggests Jo Ann Barefoot of Treliant Risk Advisors.
American Banker points out the changing landscape,
two key changes have transpired. The first is an emphasis by all federal and state bank regulators on Unfair or Deceptive Acts or Practices, or UDAAP. Another change is that the one-year-old CFPB is a different kind of regulatory animal, taking unusual steps such as bringing along lawyers during an on-site examination.
“Technical compliance with the law” used to be the primary responsibility of compliance officers, says Ann Jaedicke, a managing director at Promontory Financial Group.
“Now the compliance officer has to focus the organization on fairness, because fairness is the focus of the CFPB,” Jaedicke adds. “It’s just a different way of thinking.”
So for those looking for a turn around in the battered banking business. You might want to look elsewhere. More and more resources will be devoted to following the rules, instead of generating earnings.