Archive for category: Resources

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Chair’s Column: Advance Our Industry by Investing in Your People

Donna Hoppenjan

By Donna Hoppenjan

One of the Association’s primary goals for the year ahead is to continue shaping a solid future for the banking industry. As our members are well aware, the industry has evolved a great deal in the last several years. In order to remain receptive to the development that is yet to come, it is vital that our current bank leaders prioritize their investment into the future success of the industry.

Through the Wisconsin Bankers Association (WBA), over 30,000 bankers across Wisconsin gain access to ongoing educational opportunities. These various schools, workshops, and conferences are designed specifically to aid bankers across the state in gaining leadership skills, expanding their expertise, and serving as advocates on behalf the industry they represent.

As we invest in our emerging leaders and bankers of the future, it is important to provide relevant, high-quality resources and connections. BOLT (Building Our Leaders of Tomorrow) and WBA Connect are just two of the programs WBA offers that combine personal and professional development opportunities with numerous chances to build networks, ask questions, and share ideas. Annually, hundreds of bankers benefit from cultivating relationships with their peers and becoming involved with the Association.

Additionally, bankers may choose to utilize WBA’s Legal Call Program to connect with seasoned attorneys that understand the industry, review best practices created by bankers in Wisconsin, or stay abreast of the latest industry news by subscribing to the Wisconsin Banker Daily e-newsletter or the Wisconsin Banker bimonthly publication.

Beyond developing our current teams, focusing on the future workforce is a priority for many. In order to drive our industry forward, it is critical that bankers commit themselves to promoting banking as a career. Taking part in volunteer work, hosting financial literacy presentations, and connecting with students are just a few meaningful and inspirational actions our membership can highlight when talking about the many rewarding aspects of a banking career. WBA provides resources to help members interact with future bankers including consumer-focused resources, financial education tools, and engagement opportunities at colleges across the state.

As your team considers new ways to invest in your employees and attract new talent, I encourage you to utilize the opportunities provided by WBA. No matter how your bank decides to make the most of WBA’s programs, it is gratifying to know that the success of our institutions and team members is the sole mission of the Association.

Hoppenjan is president and CEO of Mound City Bank, Platteville, and the 2023–2024 WBA Chair.

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September 2023 Compliance Journal

As autumn arrives, so too does the September 2023 WBA Compliance Journal. In this edition, WBA Legal answers the frequently asked question of who signs a real estate mortgage and how to complete the WBA 428 Real Estate Mortgage. Within the “Regulatory Spotlight” section, bankers can review summaries of rules and notices recently published by various federal agencies. See the “Compliance Notes” section for important compliance-related updates, including a FinCEN alert regarding a new virtual currency investment scam, a reminder of a new resource meant to help banks handle check fraud claims more efficiently, and another update to FDIC’s Equal Housing Lender Poster.

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The Changing Face of Leadership

By Ned Pauley, executive consultant and director of Trellis™ at Haberfeld

Simply stated, a leader is someone others follow. Leadership is not a title. It’s not a reward for length of employment. It’s an act of service that inspires people toward a shared vision.

If you’ve been in bank leadership for a while, you know the role is changing. Perhaps more accurately, followership is changing. It’s not that people no longer want to be led. What’s changing is how and by whom they want to be led. The good news is that leaders who recognize and adapt to these changes will thrive. They will attract talent and give their banks a competitive advantage. Those who don’t will face increasing frustration in their role and decreasing returns in their results.

What type of leader does today’s workforce want to follow? Here are three qualities.

Empathic Leaders. To attain a leadership position requires the possession of skills and knowledge required for the role. No one will follow a leader who lacks core competencies. But increasingly what employees want is not just a leader who is competent. They want a leader who cares. Research conducted by McKinsey & Company and reported in The State of Organizations 2023 found that leaders believe employees quit when looking for better jobs, compensation, and work-life balance. However, employee surveys revealed that among their top reasons for leaving was not feeling valued. “The employers were focusing on transactional elements of the work experience while employees were asking for more emphasis on relational factors.” Empathic leaders create meaningful, professional connections with those they serve.

Investing Leaders. Employees in our current workforce plan on having multiple roles throughout their work career. They’re not likely to see working at your bank as an end point but rather as another stop on their vocational journey. Your most talented and growth-minded employees aren’t looking for a boss. They want a coach — someone who will help them develop. Top leaders invest time and energy in the growth of their people. They challenge, encourage, and empower. Investing leaders can promise, “Whether you work with us three months, three years, or thirty years, you will leave here better than when you arrived.” Ironically, preparing talented employees for future opportunities may be the very thing that keeps them in their current one.

Growing Leaders. As leaders we sometimes feel the need to present an image of having arrived. We have the skills. We have the answers. We think our faults are minor and mostly hidden. Our employees know better. When we are unwilling to acknowledge or seem unaware of our humanness, trust erodes, and connection is severed. It’s counterintuitive, but we’re seen as weak when we hide behind a façade of strength. Conversely, as Brene Brown has said, “Vulnerability is not weakness. It’s our most accurate measure of courage.” Even so, vulnerability in and of itself, isn’t enough for a leader. Having acknowledged our growth opportunities, we must then address them. Leaders others want to follow are aware of their limitations and courageously seek to grow beyond them. They read books, find training, and pursue counseling. They model a growth mindset.

Today’s workforce wants a different type of leader. Becoming more empathic, investing, and growing will make you the leader they desire.

Haberfeld is a WBA Associate Member.

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Making The Tough Decisions

By Kent Musbach, senior vice president, and Marc Gall, vice president and asset/liability strategist, at BOK Financial Capital Markets

The Fed’s about face on interest rates has left management teams searching for a silver bullet to help improve profitability in 2023. Unfortunately, this abrupt change in policy has created a lack of easy choices. Limited mortgage origination income, accelerating cost of funds and deposit pressures from perceived industry turmoil is hitting net interest margins at an accelerated rate. While we eagerly await a more “normalized” rate environment, how do we balance the desire for current earnings versus the need for solid, longer-term earnings?

Rough Out 2024 Budget

The balance sheet for many institutions is tough to maneuver quickly, so now is the time to start considering what 2024 income (or margin) is likely to be. For instance, the state median for loan yields has increased from 4.40% in March 2022 to 5.16% in June 2023. The Fed has increased short-term rates by 5.25% during roughly that same time period. Putting in the work today and having a realistic understanding of a starting point for 2024 will help your management team and board have a baseline for starting those strategic conversations.

Deposits in Focus 

Liquidity and deposit balances continue to be a challenge at many institutions—which is perhaps an understatement. Between the recent bank failures that have regulators focused on liquidity management and non-deposit competition from money market mutual funds and Treasury bills, deposit balances continue to slide for many.

We’ll offer a few questions to ponder: First, if interest rates fall by 100 or even 200 bps, how much will your institution realistically be able to cut interest expense given your overall realized deposit account cost increases thus far in the cycle? Second, what will it take to win back deposits lost in the recent disintermediation of deposits to T-Bills, CDs at online brokerages and money market funds?

Loan Rates Shifting Higher

Rising cost of funds and liquidity is beginning to increase loan yields versus the cost of funds. Today, we feel community bank management teams should be pausing and asking forward-looking questions, “Are we adding the right type of assets, quality and duration structure?” and “Are we truly pricing our loans and deposits properly for the optionality our customers may have in the future?”

Understanding your true IRR position is the first step to improving go forward earning

Because we are in this historically inverted yield curve, truly understanding the overall IRR of your bank is difficult. All of the ‘normal’ rate shocks that you run are parallel rate shocks. In other words, the + or – 200bps rate shock keeps the curve inverted. We recommend running a variety of non-parallel rate shocks including a steeper yield curve, with the front end of the curve lower in rate. This is what the current forward rates are forecasting.

Is it Time to Reset The Balance Sheet?

Many publicly traded banks have taken steps to improve go forward earnings by selling low yielding securities and doing some combination of reinvesting, paying off wholesale, funding loans, and/or holding cash. To make sense, these strategies should improve overall earnings versus doing nothing. With wholesale balances increasing, pressuring liquidity and cost of funds, it may be time to consider if 2023 is the year to partially reset the balance sheet for improved future performance.

Content Sponsored by BOK Financial Capital Markets, a WBA Gold Associate Member.

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Introducing FLEX: Retail and Marketing Summit

The newly rebranded event kicks off on November 15

In 2013, the Wisconsin Bankers Association (WBA) brought together retail, sales, marketing, and financial literacy bankers in Wisconsin for its first annual LEAD360 Conference. The event — which focused specifically on education, networking, and idea sharing — has provided thousands of bankers with the opportunity to connect with their peers, learn from industry experts, and return to office with action items. As the event approaches its tenth year, and the banking industry continues to undergo significant development, LEAD360 has now been rebranded as the FLEX: Retail and Marketing Summit.

“In today’s fast paced retail and marketing world, it is only appropriate that the Association continues to provide resources and highlight the efforts of bankers who work diligently to assist their bank in remaining up-to-date and relevant,” stated Miranda Gustafson, WBA assistant director – education. “Although the name has changed, the Summit continues to connect attendees with opportunities to expand their networks, exchange ideas, and deepen their understanding of various industry trends and innovations.”

A familiar face at many WBA events, Lisa Lyon will be attending her eighth FLEX Summit in 2023. Having served in various retail and marketing-support positions since beginning her tenure at Pillar Bank, Baldwin in 2013, Lyon finds significant value in the connections she has had the opportunity to foster and new ideas she has been able to introduce to the bank.

“Every year, WBA’s FLEX Summit provides several general sessions focused on particular, big ideas related to retail and marketing,” highlights Lyon. “These sessions are often complemented by additional round table discussions and peer networking sessions in which attendees have an opportunity to discuss various topics in greater detail, or dive into other ideas. To me, this is the most valuable aspect of the annual event, and why I — and many of my colleagues — return year after year.”

Gustafson notes that attendees can expect over eight hours of presentations — including general and breakout sessions — as well as ample time to network with exhibitors and bankers from across the state during the two-day event. The Summit will kick off in Wisconsin Dells on the morning of November 15 and adjourn at noon the following day.

In addition to attending the annual event, Lyon — who now serves as vice president – treasury management director — is actively involved with the WBF Financial Literacy Advisory Board. The Advisory Board, representing bankers involved with promoting financial literacy and capability throughout their communities, is charged with aiding WBA staff in the planning and organization of the financial literacy track during the Summit.

“Financial literacy often falls to a bank’s retail and marketing team, so tying financial education-focused components into an event like FLEX ensures that bankers who wear many hats are able to make the most out of their time away from their desks,” says Lyon.

Sales, marketing, and retail-focused bankers will also benefit from tracks planned in conjunction with the WBA Retail and Marketing Committees.

In addition to more than a day’s worth of sessions, the FLEX Summit will also feature two award ceremonies during a breakfast program on November 16. The first, which is presented by the Wisconsin Bankers Foundation, will recognize the efforts of bankers involved with financial education in Wisconsin communities from June 1, 2022 to May 31, 2023.

The second award ceremony — a new addition to FLEX in 2023 — will recognize one member bank that demonstrated an innovative marketing campaign between August 1, 2022 and July 31, 2023. Submissions for the inaugural WBA Marketing Award are now being accepted at wisbank.com/MarketingExcellence through Saturday, September 30.

Lyon underscores that FLEX is the perfect opportunity for bankers of all levels to get involved. “So much good comes out of events like FLEX. From broadening your knowledge to fostering connections statewide, new and experienced bankers are sure to leave motivated and inspired for the year ahead.”

Learn More and Register Now
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AI Reshapes the Workforce

Organizations use AI to recruit, retain talent

By Hannah Flanders

When asked if artificial intelligence (AI) would replace the workforce, experts agreed that most jobs require a human connection. However, some economists assert that automation by platforms like ChatGPT — an AI program with capabilities to understand and generate human-like text — may lead to displacement in some areas.

Although human resources and talent acquisition-related positions continue to be among the fastest growing user role on LinkedIn, according to World Economic Forum’s 2023 ‘Future of Jobs’ report, many agree that AI will only augment the abilities of human professionals, rather than replace them entirely.

“If the staff are not robots, the process shouldn’t be either,” says Renée Peterson, vice president – talent acquisition and development manager at Horicon Bank. “Being a community bank, it is important that we don’t lose the community feel.”

While the World Economic Forum predicts that AI will help create nearly 70 million jobs in the next five years, another 83 million are expected to be eliminated. Human resources professionals and bankers in Wisconsin, however, should not let this staggering number deter them from embracing AI’s potential.

Oliver Buechse, owner of Advancing Digital, explains that incorporating AI into an organization allows employers to empower their team. “AI allows individuals to do. By providing the opportunity for those that are interested to explore AI and its capabilities in their job function, employers will not only be fostering a culture of innovation but also assisting their organization in remaining ahead of a world increasingly reliant on technology.”

Recruiting, Retaining Talent

According to the Society of Human Resource Management (SHRM), it takes, on average, 36 days to fill an open position. During this time, HR professionals are occupied preparing a recruitment plan; sourcing, screening, and selecting candidates; making offers; and onboarding.

While AI cannot completely automate the recruiting process, some experts say that it may help streamline processes.

“AI is great at processing and analyzing massive amounts of data,” highlights Beth Ziesenis, a popular speaker known professionally as ‘Beth Z, Your Nerdy Best Friend.’ “By using generative AI (such as ChatGPT), hiring managers have the ability to analyze what people are looking for and consider feedback from current and former employees to develop a job description that may better communicate the benefits and responsibilities.”

Experts noted that HR professionals may also utilize AI to quickly screen public social media profiles, brainstorm relevant interview questions, and even personalize regret letters.

“In addition to saving time that would otherwise be spent researching or writing, HR teams will greatly benefit from the perspective AI can provide during the recruiting process,” Peterson emphasized.

Despite the large amount of data AI has the ability to process, Horicon Bank’s Senior Vice President – Chief Information Officer Cyrene Wilke states that staff needs to ensure that they are correctly leveraging the tools available to them.

“AI has existed in some capacity for many years, but its abilities only continue to expand,” says Wilke. “While AI at this current moment may allow us to identify top candidates for the position, it is important to recognize that not every qualified candidate makes their information public on LinkedIn or other social media and that sometimes, trained AI bias may still disqualify candidates with differing experience. For this reason, it is important that AI doesn’t entirely replace your staff — just helps enhance their abilities.”

In addition to helping HR professionals recruit for open positions, AI may also be beneficial in assisting and analyzing current employee retention efforts.

During the onboarding process, employers may utilize AI to automate training programs efficiently and inexpensively. As well as tracking employee progress, automating certain aspects of the onboarding process may help provide a more comprehensive training environment for individuals with varying skills or learning styles. Day to day, AI may also prove a powerful tool in assisting employees to understand how their role impacts the organization as a whole or to uncover new career paths within the organization.

“Companies that embrace the transparency AI provides will find a greater sense of belonging among their team members,” notes Buechse.

“With the ability to make predictions based on trends and patterns, AI can provide new perspectives,” says Wilke. “Of course, trained professionals would notice an unengaged employee through details such as excessive and unplanned paid time off. AI, however, would augment and complement the work HR professionals already do to help assist in recognizing trends or insights that are not always apparent at a surface level.”

As such, companies have begun deploying AI to assist in the process of gathering feedback from current and departing employees. Programs such as CultureAmp utilize AI to track employee engagement, measure employee satisfaction and company culture, as well as gather insight into the employee lifecycle. While many organizations already routinely connect with their employees for feedback and provide exit surveys to those leaving the organization, AI provides managers with a systematic and detailed analysis of employee sentiment.

“By taking the time to collect comments from team members, and understand what this feedback signifies, employers will stand apart in a huge way,” emphasizes Wilke. “AI has the potential to not just enhance the efficiency of multiple processes, but also aid in comprehending the employee experience and implementing necessary adaptations.”

Embracing Change

According to research by the Pew Research Center, 45% of Americans are equally concerned and excited about the growing use of AI.

“In order to curb the discomfort some may feel towards AI, it is critical that organizations have a written policy related to its use in human resources, and generally,” says Ziesenis. “Whether your team is waiting for more information or using it all the time — now’s the time to define your bank’s approach and protocol.”

Buechse agreed, “The U.K. has already released information related to its approach to harness the powers of artificial intelligence. In order to remain a step ahead, bankers should familiarize themselves with regulatory frameworks that are beginning to be published around the world. While regulation in the U.S. hasn’t quite caught up yet, that doesn’t mean it isn’t coming.”

As of this writing, bipartisan legislators have introduced a bill aimed at establishing an artificial intelligence commission to review, recommend, and develop frameworks for AI in the U.S. However, for those in the banking industry, it is important to consider the utilization of disclaimers, programs that have been tested for safety and effectiveness, as well as what protections are necessary to ensure privacy prior to launching new systems.

Given the ongoing expansion of AI throughout our lives, experts underscore the need to reframe how technology will amplify the abilities of humans.

“While AI may automate certain aspects of the profession, human resource teams may find that they have a greater ability to focus their energy and efforts on the most impactful aspects of the hiring and retention processes,” says Peterson. “AI will ultimately allow us to spend more time on fine-tuning the outcome.”

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Securing Your Data: Advice From An Award-winning Cybersecurity Team

By Fred Hamilton, chief information security officer, BHG Financial

Technology continues to insinuate itself into almost every facet of our daily lives, whether it is personal or work-related. As a result, protecting data privacy has become increasingly more relevant to every consumer and business. In 2022, 422 million people were affected by data breaches at U.S. companies at an average of 4.8 breaches per day. Stolen data included bank account numbers, medical histories, Social Security numbers, and more. Personal data is continuously being collected, shared, or sold, so it is crucial that everyone understands how to protect it.

In today’s world, it is incumbent upon companies to ensure they have the information security protocols in place to protect customer data and electronic assets from the growing global threat of hackers. This requires a keen focus on increasing the adoption of new technological innovations and following industry-best practices in the evolving world of cybersecurity.

Companies with an established history of successfully safeguarding electronic data often share similar characteristics, such as:

  • A significant investment in people and technological resources
  • Executive leadership that has demonstrated its mission to make information security and data privacy top priorities
  • Next-generation firewall and encryption technology to protect internet connections and Wi-Fi networks
  • Best-in-class security software installed and updated automatically
  • Industry certifications and acknowledgments that appropriate security controls are in place to protect the confidentiality, integrity, and availability of all data assets

BHG Financial is a noteworthy financial services provider that has earned recognition for its exceptional cybersecurity capabilities. The company boasts a team of seasoned cybersecurity professionals who have been recognized for their outstanding contributions to the industry. In this article, we will be sharing insights from BHG Financial’s cybersecurity experts on simple yet critical tasks that businesses should not overlook.

In acknowledgment of its dedication to cybersecurity, BHG and its Information Security Team recently received several industry accolades. First, it was honored with a 2022 Fortress Cyber Security Award for organizational excellence. In addition, the company has been certified SOC 2® Type 2 compliant in accordance with standards set forth by the American Institute of Certified Public Accountants. SOC for service organizations is a compliance standard which demonstrates that BHG Financial is safeguarding customer data throughout its services and is meeting standards for strong operational effectiveness.

Security tips to protect your data from BHG Financials’ Security Team

  • In the spirit of driving awareness about the importance of being cyber-aware, and to help you protect the integrity of your data, here are some simple tips not to be overlooked: Avoid uploading sensitive or confidential data (personal or customer account information, Social Security numbers, etc.). If you must, all information should only be uploaded to a trusted, secure source or database.
  • Be aware of any suspicious emails and do not click on unfamiliar embedded links. Be especially wary if an email contains misspelled words within the body and/or subject line of the message. Other suspicious indicators include unfamiliar email domains or enticements to act or respond immediately. Report these emails to your organization’s IT Support team right away.
  • Lock your screen when you are away from your desk to prevent others from accessing sensitive information.
  • Beware of public Wi-Fi. It can expose your data to scammers monitoring internet activity. It also greatly increases the risk of malware being transferred to your devices. If you must access a public Wi-Fi network, use a virtual private network (VPN) to add a helpful layer of security.
  • Find out if your personal information has been targeted in a data breach. It is quick and quite easy to do. Simply enter your email or phone number at https://haveibeenpwned.com/.The system will respond almost immediately, detailing when and where your data was breached.
  • Before disposing of old IT equipment, ensure no personal data remains on the system. Consider hiring a specialist to wipe the data from the device or use deletion software such as BitRaser File Eraser or File Shredder.

Your role in data privacy

Cybersecurity is everyone’s business. With a little discipline and practice, protecting the integrity of your data can become second nature. Nobody wants to be the person who accidentally downloads malware onto their company’s systems, or who leaves their online banking credentials vulnerable to external threats. Following and regularly repeating a few simple security protocols is well worth the time to remain cyber safe at home and at the office.

Content Sponsored by BHG Financial, a WBA Bronze Associate Member.

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Executive Letter: Don’t Be Left Out — Join the Bank On Initiative

By Rose Oswald Poels

For several years now, the Wisconsin Bankers Association (WBA) has been a proud supporter of the national Bank On initiative and of the Bank On Greater Milwaukee (BOGM) coalition as both efforts help connect consumers to safe, affordable bank accounts. I am happy to report that at least 20 banks across Wisconsin currently participate by offering a Bank On-certified account to consumers, and I strongly encourage others to join in the initiative.

A certified account is an account that meets the Bank On National Account Standards, which includes a transaction account at an insured depository institution with access to a debit card network for point of sale and bill payment, a minimum opening deposit requirement of $25 or less, low or waivable monthly maintenance fees, and no overdraft or NSF fees, nor account activation, closure, dormancy, inactivity or low balance fees. There are other customer service and account functionality standards that also need to be met for an account to be Bank On certified.

To obtain account validation, banks submit their account terms and contact information, and any other supportive document, to the Cities for Financial Empowerment Fund (CFE Fund) web portal for validation. The National Consumer Law Center compares the account features to the “core features” of the National Account Standards. The validation process is either an approval or denial process, meaning the account either meets all core Standards features or they do not.

Banking core service providers, including Finastra, FIS, Fiserv, and Jack Henry, have all committed to support this initiative with simplified processes for their bank customers to create and offer accounts that qualify for Bank On certification. Banks should work closely with their providers to be sure to utilize all available tools.

As mentioned earlier, I strongly encourage banks to consider joining the initiative to offer a Bank On-certified account and to participate in BOGM if they are in the greater Milwaukee region. These efforts continue to make positive impacts for un-banked and under-banked consumers in Wisconsin and for community partners who seek safe, reliable resources for those they work with, including local youth, first-time job seekers, families with disabilities, refugees, consumers whose first language is not English, and reentry individuals.

Through my participation with the Governor’s Council on Financial Literacy and Capability and the Wisconsin Bankers Foundation, I have seen first-hand how product offerings such as Bank On-certified accounts truly can make positive, lasting impacts for consumers’ financial wellbeing. Regarding the Governor’s Council, I wish to take this opportunity to again congratulate BOGM on being a recipient of a recent Governor’s Financial Literacy Legacy Award. The award is given to organizations whose purpose and heritage are ingrained in sustained financial literacy and capability efforts, and whose reputation in doing so is held in high regard in serving as a model for others in carrying on the work of supporting financial literacy and expanding opportunities through financial capability and financial inclusion. BOGM is certainly well deserving of this award.

Resources regarding Bank On and registration information for an upcoming BOGM event may be found below.

BOGM Event: September 19 in Brookfield

The Federal Deposit Insurance Corporation (FDIC) will host a Milwaukee Alliance for Economic Inclusion (AEI) meeting with BOGM to increase its impact in the region and showcase the success of members’ achievements that improve access to safe, affordable, and sustainable insured transaction accounts. The event will include a networking lunch and three facilitated small group discussions to connect attendees with successful partners, advocates, and leaders, creating greater inclusion in Metro Milwaukee’s low- and moderate-income communities.

Presenters for the event include:

  • Constance Alberts, Program Director BOGM
  • Kristi Luzar, Executive Director, Urban Economic Development Association
  • Lisa Locke, Community Development Advisor, Bank On National Data (BOND) Hub, Louisville Branch Federal Reserve Bank of St. Louis
  • D. Simone Stovall, Community Affairs Regional Manager & Bank Examiner, FDIC
  • Carol Maria, Community Affairs Specialist, FDIC

The meeting will be held Tuesday, September 19 from 11:00 a.m. to 1:00 p.m. CT at the Brookfield Lake Corporate Park – Lake Lounge Conference Room, located at 17975 Sarah Lane, Brookfield, Wisconsin.

Register for the Meeting

Resources

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Be Sure Extended Holds On Check Deposits Are In Compliance

By Dallas Belmontes, Wipfli senior compliance specialist

Regulation CC, which governs funds availability for deposits, provides a framework for financial institutions to place extended holds on deposited checks under specific circumstances.

One of these circumstances is a reasonable cause to doubt the collectability of a check. Such doubt is a genuine concern held by the financial institution as to the likelihood of successfully receiving payment for a deposited item. It can arise from various situations, such as checks drawn on closed or overdrawn accounts, post-dated checks, or suspected fraud or unauthorized activity.

Evidence Collection

To meet the reasonable cause standard, Section 229.13(e) of the regulation, there must be factual evidence that would cause a well-grounded belief in the mind of a reasonable person that the check is uncollectible.

One example provided in the regulation’s commentary pertains to check kiting (Section 229.13(e)(2)(d)). Others include a reasonable belief in the insolvency or imminent insolvency of either the check drawer or drawee financial institution, and the expectation that the checks will not be honored.

In such cases, the financial institution can indicate its invocation of the reasonable cause exception by stating that it possesses confidential information suggesting potential nonpayment of the check. It is essential to emphasize that financial institutions must thoroughly document their reasoning and provide adequate support to ensure the validity of their exception holds, especially when facing scrutiny from examiners. Noncompliance with these documentation expectations is where many institutions fall short.

Exception holds based on doubt of collectability are necessary safeguards that protect financial institutions from potential losses stemming from fraudulent or uncollectible transactions. By temporarily delaying the availability of funds, financial institutions gain crucial time to investigate suspicious transactions and verify the legitimacy of deposited items.

This process helps to uphold the overall integrity and stability of the financial institution system, fostering trust among customers and ensuring the efficient functioning of the banking industry.

Appropriate Reason For Hold

Institutions must exercise reasonable judgment when assessing the probability of an item being returned or dishonored. To make this determination, various factors should be taken into account, such as the customer’s account history, the nature of the deposited item and any relevant information provided by the paying financial institution or depositor.

The goal is to ensure that funds are not released to the customer until any doubts about collectability are resolved.

One scenario where an extended hold reason may be selected is when a teller engages in conversation with the depositor and learns that the check was mailed to them, and they were then asked to deposit the check and send funds back in the form of a wire transfer, check or gift card.

In such instances, an exception hold can be placed on the transaction. To support this exception hold, it is crucial to document the set of facts, including the customer’s actions or conversations that led to suspicions of fraud or involvement in a scam.

It is also important to recognize that holds on deposited funds can significantly impact customers who rely on quick access to their funds. Your actions can raise a customer service concern. Financial institutions are obligated by Regulation CC to provide clear and concise information to customers regarding the duration and reasons for exception holds.

This transparency ensures that customers are fully aware of the situation and can make appropriate financial arrangements. While Regulation CC is hardly new, its nuances related to check holds can cause many a banker, experienced or not, to run afoul of the requirements.

How Wipfli Can Help

Complying with the complexities of Regulation CC is complicated. Wipfli advisors are prepared to help you assess your processes and ensure that your team is meeting all document expectations. Explore our services for financial institutions to see how we can help you.

Content Sponsored by Wipfli, a WBA Silver Associate Member.

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September/October 2023 Wisconsin Banker

Learn more about how Wisconsin’s 2023–2025 Budget will impact banks across the state, upcoming WBA events, and serving Amish/Mennonite communities.

Featured inside are the chair’s column by Donna Hoppenjan, current WBA chair and president and CEO of Mound City Bank, Platteville; Lauren Moran, marketing director at Wolf River Community Bank in Greenville; and the Community Advocate, Craig Stuedemann, president and CEO of AbbyBank in Abbotsford.

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Madison, WI 53718

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