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The biggest challenge faced by community banks in 2015 was regulatory compliance. Some 40 percent of community banks surveyed by ICBA said their regulatory costs are as much as 20 to 30 percent of their annual revenues.


Fearful of Mistakes

The First Security Bank of North Dakota has felt the effects of overly complex regulation in daily operations, particularly in lending. The staff at this organization is worried that they might unintentionally commit an error under the new stringent rules of the Home Mortgage Disclosure Act.

Additionally, First Security Bank of North Dakota does not qualify for the rural and community exemptions in the Ability-To-Repay rules, and therefore, cannot write the balloon loans that would suit local borrowers.

Making Adjustments

Consumer loans are in an area of the new regulation that is distinctly complicated. Consequently, some small banks are refraining from taking on high-risk compliance customers, but maintain that regulations should not determine whether or not banks offer certain products or services.

In 2016, community bank execs should expect to increase their compliance spending. Hiring outside consultants and implementing new technology will be a priority over spending on internal staff.

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