Despite Regulatory Slowdown, Compliance Costs Continue to Rise

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NEW HAVEN, Conn., July 16, 2014 (GLOBE NEWSWIRE) -- While the pace of regulatory change slowed in the second quarter of 2014, community financial institutions' compliance-related costs and staffing needs continued to increase, according to the latest Banking Compliance IndexSM (BCI).

The index, compiled and analyzed by experts at Continuity Control, a New Haven, Conn.-based provider of compliance management systems, found that community banks needed to spend an additional $34,755 on compliance costs in the second quarter of 2014. That's almost the same amount ($39,772) that they were required to spend during the more volatile second quarter of 2013. The average institution also needed to devote an extra 517 hours to keeping up with new compliance requirements in the second quarter, which is equivalent to 1.48 full-time employees and a 7 percent increase compared to the first quarter of 2014.

A chart accompanying this release is available at

"When it comes to regulatory change, community banks are getting a chance to catch their breath, but it's not having as dramatic an effect on their costs and resources as they'd like it to," said Pam Perdue, executive vice president of regulatory insight at Continuity Control. "It's becoming clear that, whether the regulatory pace increases or decreases, compliance costs continue to rise thanks to more stringent enforcement and the specialized expertise required to manage compliance."

Staffing costs are partly responsible for the continued increase in compliance spending, as in-demand compliance specialists are able to command higher paychecks. The economic recovery has led to overall wage increases for other employees as well. This further hikes compliance spending because every staff member in a financial institution plays a role in ensuring compliance.

Recent enforcement actions have demonstrated that regulators are also continuing to crack down on institutions of all sizes, and enforcement actions can be costly and time-consuming. According to the BCI, 170 enforcement actions were issued in the second quarter. If the current rate of enforcement holds, 10 percent of all financial institutions will be dealing with the effects of enforcement actions during the next year. Regulators have even started issuing penalties to board members for failure to properly oversee their institutions' compliance issues.

"When it comes to compliance inaction, the frustration level for regulators is increasingly higher and the tolerance level is lower," Perdue said. "Financial institutions and their boards need to demonstrate that they have sound compliance management systems in place. Without them, good reputations and hard-won earnings can be lost to regulatory enforcement."

About the BCI

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.

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's sophisticated metrics are unmatched in the industry.

The BCI tracks:

  • 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.

More than 800 financial institution professionals attended the Continuity Control RegAdvisor Quarterly Briefing webcast Thursday, July 10. During this session, regulatory experts reviewed the Q2 2014 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 at

About Continuity Control

Continuity Control is a Compliance Management System (CMS) that has been engineered to reduce the regulatory impact (time, cost and risk) for community banks and credit unions. This single, unified system automates the entire regulatory lifecycle; managing regulatory updates, policies, procedures, risk, vendors, audit, business continuity and exam preparation along with compliance strategy and planning. Built by bankers and former examiners, the CMS's advanced software has been coupled with expert personalized service to help financial institutions quickly adapt to regulatory change, streamline the workload and ensure compliance.

CONTACT: Sarah Eigner 720-726-5454

Source: Continuity Control