Pub. 3 2014 Issue 2

March 2014 33 l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s By Robert Mendez, EVP, BankOnIT IMPROVE YOUR EFFICIENCY RATIO WITH CLOUD COMPUTING —WHILE ALSO IMPROVING RELIABILITY, SECURITY AND COMPLIANCE W E RECENTLY HAD THE opportunity to meet with a community bank that has one location and between $250 and $500 million in assets. The bank has a good efficiency ratio of around 50% and we asked their bank executives about this. They explained their reasoning and commitment to having a single location and rightly believed that this had helped contribute to a good efficiency ratio. We then shared with them an independent analysis that compared their bank to banks of similar size in the same state. Most of the banks had branches and, as expected, had a higher efficiency ratio (some MUCH higher) than our guests. However, two banks in the comparison had a LOWER efficiency ratio. Both of these banks were using cloud computing. What is Cloud Computing? Cloud Computing provides, as a single service, all of the technical resources your bank needs (servers, firewalls, switches, the people to run it, and assistance with policies, risk assessments, auditors and examiners). You don’t have to buy the individual components and hire people to assemble them and keep them running. Compare cloud computing to an electric utility. In the early days of electricity, manufacturing facilities often bought their own generators and generated their own power on site. But by around 1900, local generation of power had nearly disappeared. It was replaced with central generation of power—because power generated at a large centralized facility was more efficient and more reliable. Today we have a very dependable power supply and we are billed monthly for what we use, instead of making huge capital outlays to generate our own power. Like the electric utility, cloud computing creates enormous economies of scale compared to buying the components and assembling them on your own—and it does so more reliably, more securely and with more capabilities, at a fixed price based on use. Improved Efficiency Think about all the technology components your bank pays for—servers, routers, switches, backups, firewalls, firewall monitoring, software updates, e-mail hosting, data circuits, anti-virus software, licensing, outside technology firms, internal I.T. staff. All of these and more add to your bank’s complexity and your costs. With cloud computing the bank has all of the components needed to ensure secure, reliable, regulatory- compliant and cost-efficient operation of the bank’s network without spending valuable management time assembling all of the individual components. And the cloud computing provider, by providing all of these components for thousands of bank employees, can do it more efficiently, with better reliability and increased capabilities. The Pursuit of Happiness — Examination andAudit The FFIEC recently released guidance for banks that want to use cloud computing. The OCC and FRB also recently released guidance concerning a bank’s due diligence performed on technology service providers. Examiners see that the rapid changes in technology and increasing threats (like the Target hacking incident) have created an environment in which many banks no longer are able to manage internally today’s complex and integrated technology networks. As a result, the guidance encourages banks to utilize qualified outside vendors that are under regulatory oversight (those receiving a Technology Service Provider exam) and vendors that do not make use of subcontractors. I.T. exams and audits are never fun, but you can be happier with the process and have better results by using a cloud provider that has appropriate banking and legal experience, works with lots of banks, and understands and helps to provide appropriate technology components, policies, and risk assessments, as well as assistance in preparing for and responding to regulatory exams and I.T. audits. Do More with More Capability Many times bankers spend far too much time simply “fighting to keep the lights on”; in other words, making sure that existing systems stay up, new applications or new branch servers are deployed timely, data circuits are kept up, third- party software vendor issues are addressed, updates are performed, backups are done, and hundreds of other tactical issues are being addressed every month. With cloud computing bankers don’t have to spend valuable time on these issues. They can spend more time with customers or in evaluating strategic opportunities that can add shareholder value to the bank. A former banker, Robert Mendez is executive vice president at BankOnIT. BankOnIT is the exclusive developer and provider of the Bankers Private CloudTM. For more information visit www.bankonitusa.com or contact Robert at (800) 498-8877 or at rmendez@bankonitusa.com. Grow your bank, Add new employees, Change software applications... And have all of it available as needed, without the traditional wait time associa with IT. Meticulously engineered, the Bankers Private Cloud TM is available exclusively to b and designed to meet the reliability, security a d regulat ry requirements unique to bankers, all without having to buy servers or hire technical sta . With over 70 bankers, banking law and technical persons on sta you’ll have the k owledg you ne for technical resolutions, strategic guidance and regulatory support on your information technology network. Securely expanding your capabilities (800) 498-8877 ban USA TM