MINNEAPOLIS, Minn.-Credit unions and banks in the U.S. report they are feeling even greater regulatory and risk management pressures than they were at the beginning of the year.
That finding was drawn from the new Regulatory and Risk Management Indicator from Wolters Kluwer Financial Services, which found four factors in particular are driving the increased pressures that are being felt. The Regulatory and Risk Management Indicator is designed to be a barometer around the current state of the overall regulatory and risk management environment.
The Indicator, which started with a baseline score of 100 in January when Wolters Kluwer Financial Services surveyed nearly 400 U.S. banks and credit unions, rose to a score of 136 when more than 430 respondents provided their feedback at the end of April. To calculate the Indicator, Wolters Kluwer Financial Services uses 10 main factors, seven of which revolve around direct input from banks and credit unions on their top compliance and risk management concerns and three of which are based on regulatory data the company compiles.
Four Critical Factors
Among these 10 factors, four significantly drove the increase in the overall Indicator score, Wolters Kluwer said:
* Number of new federal banking regulations.
* Rising dollar amount of regulatory fines.
* Growing amount of resources needed by banks and credit unions to meet regulatory requirements.
* Challenges facing financial institutions' senior leadership in managing and controlling risk.
"Concern over the ability to comply with regulatory requirements and prove compliance to regulators were two significant factors for the largest institutions participating in the Indicator-those with more than $7.5 billion in assets," said Wolters Kluwer. "These banks and credit unions were also much more likely to have hired additional compliance and risk management professionals in 2013 than smaller institutions, with more than 60% saying they had done so."
Meanwhile, from a compliance standpoint, the company said the Indicator shows that majority of banks and credit unions are most concerned with the Consumer Financial Protection Bureau's newly combined RESPA/TILA disclosure (59%), as well as its recently issued mortgage servicing rules (53%) and Qualified Residential Mortgage and Qualified Mortgage requirements (51%). However, the largest institutions are far more concerned with Unfair Deceptive and Abusive Acts and Practices standards (55%) and managing other regulatory risks in general versus specific requirements.
"It's apparent from this first reading that banks and credit unions are more increasingly concerned with managing the growing amount of regulatory change on the horizon," said Timothy Burniston, VP and senior director of Wolters Kluwer Financial Services' Risk & Compliance Consulting Practice. "They're also looking to their executive teams and boards to play a more significant role in helping to mitigate and control the many regulatory and operational risks they face on a daily basis."
The 10 Factors Measured
The 10 factors measured by the Indicator are: 1) banks and credit unions' concern over their ability to track regulatory changes; 2) ability to comply with new and existing requirements; 3) ability to prove compliance to federal regulators; 4) the time and resources invested in compliance efforts; 5) how effective banks/CUs feel they are at managing overall risk; 6) the involvement, buy-in and ability of the executive team in managing risk; 7) the time and resources they have invested in managing risk; 8) the number of new banking regs; 9) the number of enforcement actions taken against FIs; and 10) the total dollar amount of federal regulatory fines levied against banks and credit unions.
