Edited by Benton E. Gup
Chapter 4: Improving Director Oversight of Compliance: A Bank Regulator’s View
Cathy Lemieux and Steven VanBever1 Introduction Ensuring compliance with banking laws and regulations is one of the most important responsibilities of bank directors. Director oversight of compliance has become increasingly challenging in recent years, in part because directors’ other responsibilities have required more time and increased skill-sets, leaving less time and energy for overseeing compliance: ● ● ● Oversight of strategic planning has become more challenging because the business of banking has become more demanding and competitive; Corporate governance has become more challenging because expectations in this area have risen signiﬁcantly in the wake of Enron and other scandals; and Oversight of ﬁnancial risk management has become more challenging because risk management has greatly increased in sophistication. The dramatic increase in the volume and complexity of banking laws and regulations has also made director oversight of compliance more challenging. This chapter surveys each of these trends and recommends that bank directors understand and consider enterprise-wide approaches to compliance risk management and adapt them, as appropriate, to their institutions. This would help focus directors’ time and energy on the most important compliance risks facing the bank. Ensuring compliance with banking laws and regulations is one of the most important responsibilities of bank directors Ensuring compliance with banking laws and regulations is included among the following key responsibilities of directors as detailed in the Federal Reserve’s examination manual for commercial banks:2 ● Selecting competent executive oﬃcers (including retention, management-succession planning, performance evaluation, and compensation); 44 Improving director oversight of compliance ● 45 ● ● ● ● ● ● Eﬀectively...
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