Regulators Crack Down On Heels of Record Year for Regulatory Change

NEW HAVEN, Conn., April 20, 2016 -- After issuing a record number of regulatory changes in 2015, regulators levied more enforcement actions against financial institutions (FIs) in Q1 2016 than in either of the preceding two quarters, signaling escalating pressure in the already “hot” enforcement climate.

The Banking Compliance Index (BCI), compiled and analyzed by experts at Continuity’s Regulatory Operations Center®, shows that regulatory agencies issued more than 170 enforcement actions against banks and credit unions last quarter, amounting to an enforcement rate of 11.19%.

“Even though agencies issued fewer regulatory changes this quarter, they’re still finding violations of older, more fundamental regulations, and weaknesses in institutions' control environments,” explained Continuity’s executive vice president of regulatory operations Pam Perdue.

The enforcement rate against FIs has nearly doubled since the BCI was introduced in 2012. More recently, that enforcement rate has remained above 10 percent over the last five quarters, indicating a “new normal” where more than one in 10 CFIs could face enforcement.

Amidst new enforcement, regulatory agencies still introduced 69 regulatory changes in Q1 2016, which equates to over 425 hours each institution must spend to ensure compliance with new statutes. As more FIs consolidate, the demand and competition for experienced compliance professionals also continues to increase expenses for community banks and credit unions. The average hourly wage for banking personnel jumped nearly $0.50 to $45.63 in Q1 2016.

“At the end of the day, institutions still need the support of more than one full-time employee just to keep up with regulatory issuances from the previous quarter,” added Perdue, referring to the 1,569 pages of new regulations that compliance officials must process.

“That says nothing of the time needed to take action to ensure compliance with older rules. As the volume and complexity of regulatory change grows, and oversight toughens, self-directed compliance management is proving difficult, if not impossible.”

About the Banking Compliance Index

The Banking Compliance Index (BCI) is a quarterly tracking index published by the Regulatory Operations Center®. It measures the incremental cost burden on financial institutions to keep up with regulatory changes.

The BCI is calculated each quarter using a multivariate analysis that can be weighted across different contexts and is calibrated to determine the regulatory impact on financial institutions of varying sizes, product mixes, and regulatory oversight. Using key indicators including volume, velocity and complexity of regulatory change; time expended to meet regulatory requirement(s); and supervision and the enforcement climate. The BCI data sources include: CFPB, FDIC, FED, NCUA and OCC. The BCI is calculated using an average size institution of $350 million.

• Regulatory Changes: A total count of applicable financial regulatory changes throughout the quarter.
• Page Volume: The number of pages associated with each of the regulatory changes—indicative of the complexity and workload involved with reviewing and interpreting each change.
• Enforcement Action Information (EA): Analysis of the public enforcement actions that have been issued during a quarter.
• The BCI employs a data-driven approach to provide unique insights into the depth and breadth of regulatory compliance workload impact measured in terms of a Full-time Employee (FTE) Consumption Score.

Nearly 900 financial institution professionals registered for the Continuity RegAdvisor Quarterly Briefing webcast on Thursday, April 14th. During this session, regulatory expert Pam Perdue reviewed the Q1 2016 BCI metrics and provided in-depth information on the quarter’s regulatory changes, a workload assessment of these changes and the required actions to avoid penalties. A recording of this session is available here.

About Continuity
Continuity is a leading provider of Regulation Technology (RegTech) solutions that automate compliance management for financial institutions of all sizes. By combining regulatory expertise and cloud technology, Continuity provides a proven way to reduce regulatory burden and mitigate compliance risk. Our ecosystem of solutions is designed to automate all aspects of compliance management, from interpretation of regulatory issuances through to intuitive task delegation, vendor management and board reporting. Continuity serves hundreds of institutions across 40 states. For more information about Continuity, visit www.Continuity.net.

Ian Toner
720-726-5460
[email protected]