Bank Protection Act UPDATE

OLD LAW GENERATES MODERN REGULATIONS The mission for the "Super Security Professional" in all financial institutions in the United States just got tougher.

We've been telling you for the past few months about the revisions to Regulation P (Minimum Security Devices and Procedures) that went into effect on May 1, 1991. (May 3 for FDIC schedule)

The Bank Protection Act of 1968 was enacted by Congress in response to a growing concern over increasing robberies and incidents of violence at financial institutions in America. This legislation, which is still in effect, requires the banking regulatory agencies-the Office of the Controller of the Currency (OCC), the Federal Reserve Board, the Office of Thrift Supervision (OTS), and now also the Federal Deposit Insurance Corporation (FDIC)-to issue rules establishing minimum standards at a reasonable cost for installation, maintenance and operation of security devices and procedures in financial institutions.

These rules were put into effect in January of 1969 and have remained virtually unchanged since that time.

Changes Necessary But Worrisome...
The revision proposed by the Federal Reserve Board updates the old rules. And, according to Fed, they "simplify and clarify the rule's existing areas of flexibility and eliminate many obsolete or technical requirements." In addition, references to certain required reports have been deleted. The new regulation adds no new regulatory burden, according to Fed.

Some Security Officers disagree.

While the new regulation removes many specifics, at the same time some feel it is too vague. Bankers were hoping for at least some standards on which to hang their hats. But instead almost all standards for each institution are left up to the judgment and discretion of the security officer. And in the opinion of some bankers, this leaves too much room for error.

At the same time the regulation increases the responsibility and accountability of both the board of directors and the security officer. Ken Arnold, Director of Security for the 12th Federal Reserve District talked to Security Officers at the Bank Administration Conference in Orlando in April.

He summed up the new regulation this way: "...the effectiveness of the institution's security program will rest on the ability of the security officer to identify the proper mix of security features and training, to assess local crime conditions, and to be sufficiently eloquent to enlist the support of the board of directors in the program's implementation.

"It will require an individual committed to keeping abreast of innovations in technology and training and willing to maintain regular contact with law enforcement, other financial institutions, and security representatives to remain up-to-date on the socio-economic conditions in the institution's vicinity. Finally, it will require a person who will objectively present the institution's security needs to the directors and back up the presentation with research data."

Major Change
The most important change in the new regulation is the requirement that the security officer report, at least annually, directly to the board of directors on the effectiveness of security programs. The security officer (who must be appointed and named immediately upon issuance of federal deposit insurance) must have a written security program in effect within 180 days of that time.

Specifications for training employees in safe and proper conduct during a robbery are left up to the security officer. But the new regulations requires that initial and periodic training be done and must include bank officers as well as employees.

Four specific security devices are required; a secure space for cash, a lighting system for illuminating the vault, an alarm system, and tamper-resistant locks on exterior doors and windows. Any additional security devices are up to the officer and the institution.

Opening and closing procedures are required (in writing).

The requirement of "bait" money has been removed. Its use is left up to the discretion of the security officer. As law enforcement officials tell us that "bait" money figured in less than 2 percent of robbery convictions last year, this device may be replaced with dye packs, or electronic tracking devices.

Regulations from the other agencies are similar.

One last word of caution. Our sources tell us that examiners in several districts have been instructed to ask for the written report submitted by the Security Officer to the board of directors, or to check the minutes of the directors meeting for the report, as part of their examination.

To be forewarned is to be forearmed!

Copyright © 1991 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 2, No. 4, 5/91