It would be facetious to call attorney Karen Grandstrand a banking regulations geek. But there’s no doubt about it: The chair of the bank and finance group at Minneapolis law firm Fredrikson & Byron P.A., she can swim effortlessly through some remarkably arcane information. And she can help others less adept in those depths understand it.
That was the kind of knowledge TCF Financial Corp. needed to tap in October 2010, when the Wayzata-based banking company asked her to join its board. Like all banks, TCF was picking its way across rough terrain. Beyond the Great Recession, the recently enacted Dodd-Frank Act had laid a great deal more responsibility for regulatory compliance on the shoulders of bank boards.
“The regulatory climate when I joined the TCF board was one of change and challenge,” says Grandstrand. It still is. A recent American Association of Bank Directors survey shows that 225 guidance statements from the Office of the Comptroller of the Currency put direct compliance responsibility on the board. And of course, banks have to handle myriad other statutes and regulations.
“With all of these new responsibilities, there is a blurring of the line between the role of the board and the role of management,” Grandstrand notes. “The expectation since the Great Recession is that directors are to ensure compliance. The liability for bank directors has steadily increased.”
Other Board Service
Center for Law and Business, Mitchell Hamline School of Law
Concordia College, Moorhead
Business Law Institute at Hamline University School of Law
Thrivent Financial Bank
Minnesota Women’s Economic Roundtable
In 2013, as portions of Dodd-Frank were finally being implemented across the country, TCF formed two new risk committees, partly at Grandstrand’s urging. In fact, TCF was one of the nation’s first midsize banks to create committees focused on managing risks that can damage earnings and value. The board named her chair of both the Risk Committee and the Risk Subcommittee (which performs deep-level policy and risk reviews for the main committee).
As chair of those committees, Grandstrand assesses, and helps prepare TCF management to handle, all types of risks. There’s reputation risk—the risk to earnings, capital or franchise value arising from negative public opinion. A banking organization faces this kind of risk when it’s the victim of a data security breach, for example. Another risk is compliance risk—the potential for damage due to violations of laws or regulations. Banks need to have policies and procedures in place to mitigate these risks, and to deal with compliance violations should they occur.
Having worked on both sides of banking regulation, this is territory that Grandstrand knows well. She joined the Federal Reserve Bank of Minneapolis in 1985 as an attorney in the legal department; in 1989, she was promoted to banking supervision, responsible for consumer compliance regulation. In 1999, she joined Fredrickson & Byron, where she advises financial services clients on regulatory examination and compliance and M&A.
Grandstrand “can grind through hundreds of pages of regulatory material in pretty short order, with what is, in my view, 100 percent comprehension,” says Vance Opperman, TCF lead director and president and CEO of Key Investment Inc., a private investment company involved in publishing and other activities. (Key owns MSP Communications, which publishes Twin Cities Business.) What’s more, Opperman adds, Grandstrand is valued by her board colleagues not only for her deep knowledge of regulation but also for her ability to clearly communicate that knowledge.
Since TCF implemented risk committees, Grandstrand says that other board members have told her they feel more comfortable focusing on business strategy, knowing she is paying attention to each new or changing regulation. Grandstrand has also benefited from the relationship.
“I get to interact with incredibly bright and talented individuals on the TCF board,” she says, “and it has made me a better lawyer and advisor to my clients.” —Fran Howard