Banking in the Ninth

The Role of the Relationship Managers and Consumer Affairs Contacts

Safety and Soundness/Consumer Affairs: March 2014

Published March 11, 2014  | March 2014 issue

Understanding and responding to the unique and local operations of state member banks and bank holding companies and maintaining effective communication with firm management is central to Minneapolis Fed supervision. Relationship Managers (RMs) and Consumer Affairs Contacts (CACs) are critical to achieving these objectives. These two positions also ensure continuity between examinations and allow for timely exchanges of information with institutions as conditions change. Finally, by providing designated contacts for each institution and assigning responsibility to individuals for maintaining knowledge of each institution’s operations, they eliminate the need for multiple requests for similar information.

Because of the centrality of these roles to our supervision and because we receive questions about the roles, we devote our main article of this newsletter to describing the overall role for these two positions and their day-to-day activities.

Main Roles: RMs and CACs are primary points of contact and resources for state member banks (and their parent bank holding companies) and large community holding companies in the Ninth District.1 Each state member bank and large community holding company is assigned an RM and a CAC. The RM is a supervisory examiner responsible for monitoring safety and soundness matters at the assigned institutions. Similarly, the CAC is responsible for monitoring compliance and Community Reinvestment Act (CRA) matters. While the roles are slightly different, the responsibilities are similar. The primary responsibilities of the RM and the CAC are to develop and maintain strong working relationships with supervised institutions; provide effective supervision and risk identification; quickly analyze and respond to identified risks; maintain an understanding of the institution’s strategies, operations, and environment; act as a resource for institution management; and facilitate communication between key stakeholders. When RMs and CACs are effective in their roles, the regulatory burden faced by the institution should be less than would be the case without an RM or a CAC assigned.

Day-to-Day Activities: The RM is responsible for developing and ensuring implementation of the safety and soundness supervisory strategy for each assigned institution based on the institution’s unique risk profile. In order to be effective, the RM must maintain a solid understanding of each institution and the unique factors that impact its risk profile. This requires periodic contact with senior management and in-depth analysis of regulatory reports. As the RM becomes more familiar with the institution and management, the frequency of contact is typically tailored to meet the supervisory objectives of the Reserve Bank as well as the desires of management.

As with RMs, CACs tailor their activities to the complexity and risk of each supervised institution. CACs conduct monitoring activities, stay informed about developments at the institution, and provide post-examination support. CACs who are responsible for larger, more complex institutions will also develop a supervisory strategy tailored to the risks of the assigned institution, conduct target examinations, and have frequent and ongoing communication with their assigned institutions.

A Central Contact

RMs and CACs are each assigned a relatively small number of institutions, which allows them to focus on each of these entities and become familiar with the management, business strategy, financial condition, local economy, and compliance-related risks. In addition to serving as a contact for bank management, RMs and CACs serve as a resource for each other as well as other stakeholders, including the staff of the Board of Governors, state and federal regulatory agencies, and Reserve Bank Applications, Statistics, and Credit divisions. This approach often helps limit the need for multiple parties to contact the bank for information. Similarly, the CAC or the RM can assist the banker or bank owner in working with Applications or other Reserve Bank supervision functions by providing background information or by explaining information needs to bank management. The RM and the CAC also have access to a variety of resources within the Reserve Bank and the Federal Reserve System to assist bankers with institution-specific questions, including the specialized, extensive knowledge found with SRC’s Risk Group.

Dedicated Resources

The RM is dedicated solely to the ongoing supervision of the assigned institutions. Because RMs travel infrequently, they are generally available to the institutions and Reserve Bank management and can quickly respond to questions and concerns. When an event occurs that may impact regulatory oversight, the RM can quickly analyze the situation, recommend a course of action, and communicate any potential change or resolution to all affected parties. The RMs are available for questions from all institution staff members or directors, not just the chief executive officer or president.

The CAC functions in much the same way as the RM for the larger, complex, or higher compliance risk profile state member banks. For these entities, the CAC is generally available to respond to questions from the institution, monitors compliance developments, and responds to new situations. For institutions with a lower compliance risk profile, the CAC often works with the Consumer Affairs Hotline (staffed with a dedicated examiner) to provide effective responses to questions received. The CACs also provide input into the supervisory strategy for the institution based on their knowledge of the institution’s practices and overall compliance risk profile.

Maintaining Continuity

An important responsibility of the RM and the CAC is to ensure continuity of the supervisory approach at each assigned institution. This responsibility is met through ongoing supervisory contacts detailed previously, but is also important in the context of examinations. In order to maintain a degree of independence and separation of duties in the safety and soundness supervision function, RMs do not serve as the examiner-in-charge (EIC) at safety and soundness examinations and may play only a limited role in the on-site examination. The EIC and examination team conduct the examination, develop the findings, and are responsible for examination conclusions. The RM provides important information to the EIC as part of the scoping process and through ongoing conversations during the examination. RMs are also key players in the post-examination vetting and review processes. These conversations ensure that the examination team has access to information about the bank and its operating environment prior to the examination and that there is continuity in the approach to issues between examinations.

CACs are also responsible for ensuring continuity of the supervisory approach, though they accomplish this mission in a different way than the RM. Because of the nature of compliance examinations and the longer duration between full-scope compliance examinations, CACs are likely to play a more central role in examinations, including sometimes serving as EIC. For banks subject to a more continuous supervision strategy (i.e., subject to periodic target examinations), the CAC is typically the EIC for the target examinations. In addition to being on examinations, CACs monitor developments between examinations and frequently participate in mid-cycle monitoring events.

An Efficient, Routine Support for Banks/BHCs

Although many financial institutions provide similar services, state member banks and large community holding companies to which RMs and CACs are assigned are not all the same. Some offer unique products and services while others stick with traditional community banking products. Some have devised strategies to remain independent; others have determined they need to grow. Each institution has a unique story. Having an RM and a CAC who know that story helps shape and maintain the supervisory strategy and reduces the need for the banker or owner to explain themselves repeatedly to Reserve Bank supervisory staff. It enables the Reserve Bank to monitor and respond to changes at the institution, whether bank or regulatory driven, in a timely way. The RM also helps ensure consistency among responses and communications.

A unique element of the RM program is its regional focus. Each RM has assigned institutions within a defined territory, usually individual states. As such, the RM is expected to maintain an increased level of knowledge about specific economic conditions, competition, and state law, and can provide that contextual information to examiners or others within the Reserve Bank’s supervision division. The regional focus also allows for consistent communication with state supervisors.

A Proactive Approach

The continued communication between the RM, the CAC, and the institutions provides a conduit for updates on key risks, hot topics, or issues affecting the region or a specific economic area. This relationship is particularly helpful in today’s changing regulatory environment. RMs and CACs proactively share information that may affect an institution’s safety and soundness or compliance risk profile. CACs notify Reserve Bank management when compliance- or CRA-related issues appear to warrant accelerating an examination or conducting a supervisory visit, advisory visit, or other outreach activity. This allows the Reserve Bank to proactively address emerging risks and hopefully prevent serious violations or other issues from occurring.


1 Large community holding companies are those with consolidated assets between $1 billion and $10 billion.