This past quarter saw the lowest number of enforcement actions against financial institutions since 2013 (though there were some prominent cases in the media spotlight that may have led observers to think otherwise.)
New Haven, Conn.-based compliance management company Continuity noted that despite the decrease in enforcement actions — 99 vs. 150 in the prior quarter and 159 the previous year — financial institutions will still need to devote the equivalent of an additional 1.63 FTEs to manage their compliance burden, or $39,734 for the quarter.
The most recent installment of Continuity’s quarterly Banking Compliance Index was released on Oct. 19. The company bases its compliance costs on a small bank size ($350 million). If your bank is much larger, this may mean the new regulations issues this quarter for financial institutions — 77, totaling 2,727 pages — may not make much of a difference. But for smaller institutions, the ever-growing regulatory burden can mean a rolling crisis.
Pam Perdue, executive vice president and chief regulatory officer for Continuity, said that the major actions during the quarter may have lowered the total number of actions. “Those consumed a larger portion of the agency’s resources,” she told Bank Innovation.
Perdue also pointed out that smaller banks should be wary of facing what Wells Fargo faced. “It takes time for the concepts and principles [used in the Wells Fargo CFPB action] to trickle down,” she said. “This will trickle down to smaller institutions.” But chances are it will not be so severe. “Wells Fargo was a bit of an outlier. It had a unique fact pattern of encouraging and incentivizing this behavior. The agency will be on notice to look out for unfair, deceptive or abusive acts or practices — UDAAP concerns.”
The fear of actions trickling down to smaller banks may lead those institutions to embrace standards, which makes meeting regulatory requirements more predictable, as well as the technology that helps satisfy those requirements in a systemized way.
There is also the hope that a Trump may sweep away many of the more irksome requirements, including much of Dodd-Frank, but Perdue finds that unlikely. “Undoing what’s been done is more complex than soundbites,” she said. “Un-entangling the 280-some regulations could be as expensive and time-consuming as it was to put them in.”
At the same time, a Trump administration would be unlikely to show as much interest in enforcing fair lending laws, she said. The main effect of a Trump administration will not be fewer regulations, Perdue noted, but perhaps, fewer resources available to agencies to enforce existing regulations.
Banks, in other words, may look forward to a period of benign neglect, after being in an unwelcome spotlight for too many years.
Continuity’s Banking Compliance Index can be viewed here.Like This Post