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Financial institutions should now focus on continuous improvement

Jul 14, 2020

A lot has happened over the last few months.  Adjusting how we work in response to COVID-19, the race to process and distribute Paycheck Protection Program (PPP) loans and record low mortgage rates have caused a significant disruption in community banking.

Closed lobbies and a shift toward remote banking have prompted us to reconsider our understanding of customer needs and preferences. Alternate work arrangements, including reduced staff and working remotely have tested the functionality and efficiency of our communication and technology platforms, and processing PPP loans and mortgage refinances have pushed the limits of our lending departments.

This year has been the perfect storm, and most community banks were not prepared for the severity of the impact.  In many cases, the increased strain of all of these factors intensified existing pain points within current processes,

To complicate matters further, on June 8, 2020, the National Bureau of Economic Research indicated that February 2020 marked the end of the decade long expansion period that started in June 2009, and signaled the start of a recession.  The last recession took a toll on community banks, with 85% of the 414 failed banks having less than $1 billion in assets, and 60% having assets less than $250 million.

While the current economic conditions are different from what we have seen in the past, the national emergency, economic shut down, civil unrest and government relief will most certainly have a negative impact on the banking industry. Effective and efficient processes will be a necessity to help accomplish more with less.

These stressful and difficult events have exposed processes that were overwhelmed or failed and will likely continue to cause issues if not addressed.

The shining light through this has been the windfall of fee income generated by the PPP loans.  While many banks are leaning toward moving the excess funds generated from the loan fees to the loan loss reserve to prepare for the worst, consider investing a small portion of those funds in future growth by addressing outdated and ineffective processes.

All things considered, banking over the last 5 years has been pretty easy.  In general, the examiners were less critical, customers were making payments on their loans, and we had time and resources available to compensate for processes that are overly complex, clunky, and inefficient.

When credit quality starts to decline, margins shrink and examiners begin looking closer at controls in place to ensure safety and soundness, things will get tough again.

Strong efficient processes reduce costs, improve controls and increase the capacity to do more with less.  Now is the time to invest in building a strong future and solid foundation to weather the storm.

Want to learn more?

How to shift planning from timelines to trigger events

Making the shift from crisis management to future thinking

Being more agile during COVID-19

Did your COVID-19 changes meet UDAAP rules?

The challenge of integrating controls into an efficient process

Internal controls and data tracking for financial institutions during COVID-19

See our COVID-19 articles on:

Talent and strategy
Business finance
Legislation and regulation
Personal finance


Danielle M. Heidemann, CIA
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