Pub. 14 2019-2020 Issue 6

WWW.NEBANKERS.ORG 28 Darlia Fogarty brings a wealth of knowledge and practical experience to Compliance Alliance banks and staff. Darlia served as a commissioned national bank examiner with the OCC for a large majority of her career, where she developed an expertise in compliance while administering examinations in banks of all sizes. She contributed as a member of the Retail Credit Team, with a strong knowledge of Compliance as well as all other areas of the banks operations and lending. Darlia also has many years of experience as a compliance officer/ auditor and 4 years as a compliance/audit consultant. need to support their position. If auditors request reports to assist them in their analysis, the bank can go to the data ware- house and recreate reports if there is any question of potential irregularities. Once we have the delivery issues addressed, we can focus on the actual reporting and best practices. Board members greatly appreciate a shift toward a more ef- ficient and effective agenda, with a focus on committee reports and presentation of only meaningful information about the condition and operations of the bank. Most directors only visit the bank once or twice amonth, whichmakes a full understand- ing of the bank’s plans and status very difficult. There needs to be an educational element in board meetings. Most directors have an ongoing need and desire for growth and development in their understanding of the banking industry. With educa- tion, directors can become more effective in their recognition and understanding of the risks to be monitored, as well as the factors that most influence a bank’s strength and performance. Financial and operational presentations by management should focus on informing the board members on what time it is; not how the watchwas built. This approach can result inmore interesting and informative boardmeetings andwill likely result in greater interaction and participation by the board members. There are no regulatory requirements on information that must be included in the monthly board package, the only re- quirement is that the board should receive and review enough information to effectively manage and oversee the bank. That being said, there are a few best practices for assembling infor- mation for your board’s review. Best Practice #1 — Provide the Board with Informa- tion, Not Data Change the monthly financial report to something mean- ingful. Most boards need to know only about 20 – 30 key data points and ratios and how those numbers compare to budget, The typical financial report at a bank board meeting is encompassed in a 25-30 page document that blurs into a very detailed, and often mean- ingless, presentation of pure data that is often difficult to follow. Board of Directors — continued from page 27 peer banks and prior year results to have a good handle on the condition of the bank. The typical financial report at a bank board meeting is encompassed in a 25-30 page document that blurs into a very detailed, and often meaningless, presentation of pure data that is often difficult to follow. Providing meaningful information in an understandable format is essential for the board members to identify and man- age risk. Less is often more in effective board presentations. Best Practice #2 — Encourage Board Participation No board should have a devil’s advocate who is in opposition to everything, but there should be an open enough relationship in the board room which allows for opposing views and occa- sional “no” votes. Many times there are meaningful questions that go unasked in the board room. Board members need to feel informed and comfortable enough to ask challenging ques- tions, and also to say that they don’t understand a proposal or a presentation. In my experience, “Why?” can be a very powerful question. I know several bank boards that have greatly benefited from a few independent thinking directors in the past years that lead up to the current economic downturn. Those directors had the insight and the courage to question the popular belief of the booming real estate market. More importantly, the culture of the boards on which they served allowed for real discussion of concerns expressed by directors. Information to Include in the Board Package Financial performance reports — These reports provide supporting information of the bank’s health and profitability. Riskmanagement reports— Board reports should allow the bank’s directors to assess the institution’s ability to man- age, monitor and control risks through the review of processes, policies and practices. Again, there are no regulatory requirements for these re- ports, and it is obviously different for each bank. Consider your bank’s complexity and markets and require your management to provide information that will give you the ability to make informed and quality decisions. 