Enforcement Actions Against Financial Institutions Plummet to Record Low in Q3

NEW HAVEN, Conn., Oct. 19, 2016 (GLOBE NEWSWIRE) -- The rate of enforcement activity against financial institutions in the third quarter of 2016 dropped below 7% for the first time since The Banking Compliance Index (BCI) was introduced in 2013, coming in at 6.54%.

The BCI, compiled by Continuity’s Regulatory Operations Center® to measure and analyze the volume of regulatory change impacting financial institutions, showed that despite this downturn in enforcement, the average financial institution will require 1.63 additional full-time employee equivalents (FTEs) to deal with the regulatory changes introduced between July and September of 2016.

This represents an additional $39,634 cost burden for the quarter, bringing the trailing twelve months' cost figure to $150,676 for an average financial institution just to keep up with the changing regulatory environment.

“Although significantly fewer enforcement actions were initiated in this past quarter, the number of items within each enforcement action jumped in Q3 by 250% above the four-year average,” said Donna Cameron, Continuity’s Director of Regulatory I/O. “These complex activities pose a heavy compliance burden on institutions, adding to the already high costs of keeping up with new regulations.”

There are a number of potential explanations for the dramatic drop in Q3 enforcement actions, including a possible reluctance to initiate new actions before a presidential election, due to the uncertainty regarding outcomes. In addition, regulators now have fewer financial institutions to oversee, with 290 banks having merged, consolidated or closed since this time last year. And in Q3, those regulators focused on larger, more complex institutions that consume greater supervision and enforcement resources, leaving fewer resources focused on smaller institutions.

Another possible explanation for the enforcement decline might stem from external pressures of judicial actions involving the Consumer Financial Protection Bureau. In addition to forcing an inward focus at the Bureau, the criticisms and litigation may have caused other agencies to proceed more cautiously in exercising greater prudence and discretion before doling out punishment.

“Despite the dip in enforcement actions this past quarter, it would be unwise for financial institutions to become complacent,” noted Pam Perdue, EVP and Chief Regulatory Officer at Continuity. “Historically, periods of lower enforcement activity around presidential election cycles are followed by increased scrutiny, and the actions taken against large entities always trickle down to smaller institutions.”

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 held on Thursday, October 13. During this session, regulatory experts Pam Perdue and Donna Cameron reviewed the Q3 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 Regulatory 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 at a fraction of the cost. Our solutions are designed to automate all aspects of compliance management, from interpretation of regulatory issuances through intuitive task delegation, vendor management, and board reporting. Continuity serves hundreds of institutions across 40 states. For more information about Continuity, visit http://www.Continuity.net/.

Press contact: Townshend Peters tpeters@csg-pr.com 720-726-5432

Source: Continuity