The election of Donald Trump has brought uncertainty and relief to bankers in seemingly equal measure.
In terms of regulation, relief may be predominating these days, but there are plenty of reasons to stay on one’s guard, according to Pam Perdue, executive vice president and chief regulatory officer of Continuity, which provides banks with compliance management solutions.
Continuity has been tracking new regulations and the burden they bring to FIs since 2013, and the first quarter of 2017 saw the lowest score — a measure of how much new regulations cost in employee time — in the index’s history. In the quarter, according to Continuity’s Banking Compliance Index, banks needed just 222 hours to comply with new regulations, down from 809 the previous quarter, a decline of 73%. The incremental cost of new regulations during the quarter was $10,360, down from $53,046 the quarter prior.
There is seasonality associated with the drop, but not enough to explain the dramatic decline, Perdue said. New regulations a year ago, in Q1 2016, required 428 hours to comply, at a cost of $29,021. And the decline in new regulations is not just due to Trump, though it’s likely Trump-related. The pause in regulatory activity may be due to understaffing or vacancies in regulatory bodies, Perdue said — vacancies the administration may not be in a hurry to fill.
In any case, a decline, even a large one, does not mean life is easy street for compliance officers. The quarter saw 1,945 pages of new regulations — bedtime reading for most, but enough to keep bankers up at night.
Perdue also warned against optimism about repealing regulations under Trump, particularly the huge and complex Dodd-Frank Act. “It takes as much time to undo a law as it does to enact it,” Perdue said, adding that portions of Dodd-Frank have not yet been fully implemented by many institutions.
The mortgage industry is in particular need of regulatory relief, Perdue added. “Laws around disclosures have become overly burdensome. But the challenge [in rolling these back] is that some of these regulations are still in a state of becoming.”
Banks also have to reckon with enforcement actions, which this quarter were more complex than usual.
All of that means, this quarter may not be as wonderful as it may seem from the numbers. “It’s not really a respite,” Perdue said. “Banks just got acclimated to exceptional regulatory activity and constant change, so any stabilization and it feels like regulation has dropped off a cliff.”
So, the regulatory pace has dropped, but compliance teams are still busy, she added.