NorthWesternFinancialReview.com Blog

One of the things I hear from bankers is that their regulators are encouraging them to hire a full-time information technology professional or — but in some cases, and — a full-time compliance officer. These are typically big-ticket employees, commanding salary and benefits that easily top $80,000 or $90,000 per year. So for a bank that needs to hire both, they are looking at a bottom-line hit of $150,000 to $200,000. Both are completely defensive hires; neither add a dime to the bottom line.

Two hundred thousand dollars is a lot of money. In Iowa, for example, excluding the 48 banks that lost money last year, there were 33 banks whose entire net income for 2009 was less than $200,000. (The state has 367 banks total.) Or in Wisconsin, where there are 281 banks, there were 29 banks with total 2009 earning of less than $200,000, not including 73 banks that lost money.

I have not doubt that the owners of these banks want to comply with the requests of regulators, but you can see the difficult situation that puts them in. They end up doing something that basically wipes out their income. In many cases, these bankers will decide to sell. These are the kinds of things that lead to accelerated industry consolidation. Now the Main Street shop owner has only one bank to approach for a loan rather than two. That business owner’s chances of obtaining credit for expansion or other needs just dropped substantially. This is the kind of thing the corrodes our economy.

I once heard someone say that they thought the government was doing a good thing by requiring banks to hire more IT and compliance professionals, saying it was a form of job creation. Well, in fact, it is just the opposite. These kinds of mandates ultimately will make it much more difficult to get a job, not just in banking but any in field.