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Regulatory Watch

Banks Still Not Optimistic About Regs

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January 24, 2019

Despite regulatory relief measures banks and credit unions still fret over compliance

BankingMost banks and credit unions are still concerned about regulatory compliance and risk, according to a survey from Wolters Kluwer. Results show that despite the passage of regulatory relief measures by Congress, 62% of respondents "indicated they ‘do not anticipate a likely reduction’ in regulatory burden in the coming two years.” Risk management concerns also scored high in the survey.

In its annual Regulatory and Risk Management Indicator survey for the US, Wolters Kluwer said its “Main Indicator Score” showed an 85, which represents “continued anxiety on certain risk and regulatory issues that demand close attention.” Wolters Kluwer noted however that there is “a notable easing in the anxiety levels of US banks and credit unions in managing their risk and regulatory compliance obligations as compared to the 2017 survey results.” In fact, the 85 score represents an 18% decrease from the 2017 score.

“While we see a reduction in the Main Indicator Score, more than 60 percent of respondents continue to rate their compliance concerns as a ‘7 or higher’ on a 10-point scale. It is notable that risk management concerns also remain fairly high, and there is palpable apprehension about several top issues, including cybersecurity, IT risk and credit risk that respondents indicated will receive escalated priority and investment in the coming 12 months,” said Timothy R. Burniston, senior advisor for regulatory strategy at Wolters Kluwer.

Despite the easing of the score, rules and regulations compliance “is still very much part of an ever-evolving risk management landscape that continues to challenge institutions,” he said.

Mr. Burniston said the lower overall score was due to sizeable decreases in regulations, enforcement actions and fines, “particularly the number of new federal regulations issued during the 2018 survey period compared to the prior year.”

Looking ahead, Wolters Kluwer reported that institutions indicated they are “likely to make moderate to high investments in updating policies and procedures (78%), strengthening risk assessment and controls (77%), and training their staff, board of directors and senior management (75%) as priorities. The responses indicate a continuing concern about compliance risk management in general and point to the specific areas regulators are likely to scrutinize.”

Some of the specific regulatory compliance challenges included “complying with the looming Current Expected Credit Loss (CECL) impairment standard, followed by fair lending; unfair, deceptive, abusive acts and practices (UDAAP); state-issued regulatory requirements and several others. Read more here.

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