The correct answer is B.

Improving regulatory relations requires demonstrating commitment to compliance and risk management. By developing robust internal supervisory policies, the bank shows proactive management of regulatory risks. This addresses potential regulatory concerns directly, which is more likely to improve their perception of the bank. In addition, coordinating submissions with other banks can help to demonstrate the willingness to adhere to guidelines and timelines.

A is incorrect. While more funding for the compliance department might seem beneficial, it's not necessarily the solution to improving relations with the regulator. The key is how effectively these resources are used in enhancing compliance, not merely the act of increasing budget. Without a comprehensive plan for risk management, increased funding might not lead to improved regulatory relations.

C is incorrect. Public relations campaigns can improve the image of the bank among its stakeholders, but they might not have a significant impact on the bank's relationship with its regulator. The regulator is more interested in the bank's adherence to regulatory standards, rather than its image or reputation.

D is incorrect. While open communication with the regulator can be helpful, this is not a solution in itself. The regulator is primarily interested in seeing tangible improvements in the bank's risk management and compliance procedures. Without the demonstration of such improvements, merely discussing the bank's progress might not effectively improve relations.

Things to Remember

• Improving regulatory relationships demands a firm demonstration of commitment to compliance and risk management, rather than merely increasing the compliance department's budget.
• Developing robust internal supervisory policies can show proactive management of regulatory risks. This can address regulatory concerns directly and improve the regulator's perception of the firm.
• Coordinating submissions with other banks and adhering to guidelines and timelines can further demonstrate a commitment to regulatory compliance.
• Regulators are primarily interested in tangible improvements in a firm's risk management and compliance procedures. Mere discussions or image improvement campaigns are not sufficient in themselves.