How to Stay Community Strong in an Increasingly Regulated Banking Environment

Dalia Martinez explains why IBC, the regional bank with a friendly reputation, intends to preserve their personal-banking tradition even in this era of strict banking regulation

There’s a perception out there that small, traditional banks are dead. What do you say?
We’re proving that they’re not. There is still a place for the strong community bank. I have spent many years working in small banks where I was able to learn everything that a bank does. Mostly, I learned that there is value in institutions like IBC where customers can come to expect that authentic and genuine side of banking. IBC has the feel of a family operation. We want to always be able to react quickly to customer needs. We operate regionally to keep our personal touch alive.

Dalia Martinez Executive VP of Corporate Compliance and Corporate Operations Officer IBC Bank
Dalia Martinez, Executive VP of Corporate Compliance and Corporate Operations Officer, IBC Bank

You’ve climbed to the top of your industry without formal collegiate education. How have you been able to turn that into a strength?
Though I encourage everyone to pursue a higher education, I strongly believe that the lack of a college education should not hinder your success in life. When you rely on real-world training, you learn from your own mistakes and the mistakes of others. For example, although we teach customer-service techniques—and those tools provide a great foundation—it isn’t until you deal with an actual upset customer that you learn about customer behaviors. If you don’t experience that in the real world, you just don’t get better. On-the-job training shows you how to get things done and how to improve a task the next time around. It also teaches collaboration because you have to rely on the people around you that know what you need to know. Everybody brings a different set of skills to the table, and learning from those around you is the best education. It is also essential to continue to learn by attending seminars and conferences, and by studying and reading banking literature which is a critical component in raising your knowledge level. Lifetime learning is critical.

How does that work now that the roles are reversed and you are the leader?
I continue to learn, but today I’m more of a mentor. I like to think that others trust my judgment due to the many years I have been with the bank. I always try to teach my team that making a decision as a group is powerful because you can leverage the experience of different people to reach the best decision. This type of collaborative process is what creates greatness.

The world of banking is seeing some major changes. How are those changes hitting IBC?
The post-recession regulations and the Dodd-Frank Act have created a stifling environment. There have been more than 14,000 pages of proposed and final regulations that we have to deal with. Talk about learning something new every day!

And you lead compliance! How is it possible to process and respond to so much information?
It’s a big challenge for a community bank because larger banks have an army of lawyers and specialists to deal with this. We don’t have as many resources. Furthermore, the big guys are gobbling up good compliance employees. It’s sad because we’re losing a community bank a day. There were more than 14,000 banks just a few years ago, and now there are less than 6,000. At IBC, we mentor our staff and this creates a sense of ownership.  Collaboration across our company is critical.

That brings up one obvious question. Why choose a small bank in this environment if the major players have all the resources and talent? They have a lot of resources, but community banks are definitely full of talent. As a community bank, we know the people and the community in ways big banks don’t. We don’t have to analyze data to figure out community trends; we live them. We’re active in the community and invested in people and organizations. We help our neighbors through community outreach, and this helps our employees grow as leaders. We have built relationships with our customers, which is vitally important to them and to us. Community banking offers person-to-person
relationships.

But are these new rules limiting what you can do for your customers?
Right. Years ago, even if someone failed certain standards, we could grant a loan if we knew the customer and they had a proven track record with the bank. Now, the government says that in order to be “fair,” each applicant has to meet certain standards or we can’t make the loan. The new rules are so strict that we’re seeing a 20-percent drop in the amount of people that can qualify for a home mortgage. There are so many changes, and that affects how we advertise, what information goes to customers, and how we process customer requests. Banks are now required to develop products and services that are more plain vanilla, and these regulations are taking the ingenuity away from banking. We are rapidly losing the “art” of banking.

What can banks like IBC do in this environment?
The most important thing all bankers can do is use our collective voice. Anyone running for office needs money, and those people need to understand what happens in the real world. These regulations were meant to restrict banks, protect the economy, and protect customers. However, they are doing just the opposite. They are removing choice from customers and they are killing banks. We have the responsibility to tell that story. IBC is very involved in the legislative process, and we talk to anyone and everyone we can about these issues through associations and other means. We are directly involved. We are not going to leave it to other people to control our future.

And what can you do from inside the bank?
We can understand what customers want. When regulations and rules changed, free checking got expensive, and most banks stopped offering it. We still offer free checking because as the largest minority-owned financial institution, we believe it’s important to get unbanked people into the banking system. We’re trying to follow rules and modifying what we can while minimizing risk and ensuring a return for investors. We have to do that while also providing the products and services our customers want. Frankly, we are trying to remain a community bank.

Are those customer “wants” changing?
Some want more technology, and some want less. Anyone that says the branch is going away is wrong. The branch is alive and well, especially outside of metro areas where many people want to go the bank and visit with the tellers and talk to a live banker. But at the same time, we have to offer online banking, ATM deposits, mobile deposits, and all the other high-tech solutions for those customers that want them.

Everyone is concerned about safety these days. What does a bank have to do so that customers feel secure?
We have to remind our customers to keep their computers updated with anti-virus software and other tools—but the debit card side is a different animal. When you swipe a card at a store, the retailer is your first line of defense. But card-company rules don’t require a merchant to ask for identification. Whoever steals your card is off and running. But you can’t walk into IBC and cash a check without ID. What’s missing in the regulatory world is common sense. And here’s the dirty little secret: all the money lost in these high-profile breaches hits the banks and is very inconvenient for consumers. It’s not hitting the retailer. It hits the bank—and big banks can absorb these losses, but regional or community banks cannot absorb them as easily.

What does IBC have to do to continue its success?
We’ll keep doing those key things we’ve always done; connecting with our customers to find out what they want and need. We will continue to work to strengthen the communities we serve. We also have to unite with other bankers to tell the story of why community banks are so important to the communities we serve.  In our view, community banks are the financial resource for Main Street. We must protect them at all cost.