Regulatory changes create massive compliance burdens in 2016’s final quarter

NEW HAVEN, Conn., Jan. 17, 2017 -- After issuing fewer than 80 regulatory changes in each of the first three quarters of 2016, financial regulators concluded 2016 by introducing 115 regulatory changes in the fourth quarter. These changes were spelled out across 6,057 pages that took financial institution employees over 800 hours to process.

The Banking Compliance Index (BCI), compiled by experts at Continuity’s Regulatory Operations Center® (ROC) to measure and analyze the volume of regulatory change and enforcement impacting financial institutions, shows that the average financial institution needed more than two full time employees just to manage regulatory changes from the last quarter. All told, the cost burden of these changes totaled a little over $53,000 for a typical community financial institution.

Since Q1 2013, the BCI has tracked roughly 3,300 pages of regulatory changes per quarter. Two specific issuances, related to mortgage servicing and prepaid accounts, accounted for roughly 2,600 pages of Q4 2016’s regulatory changes.

In addition, the enforcement climate warmed after last quarter’s uncharacteristic cooling. Regulatory bodies levied 116 enforcement actions in Q4 2016, with an average of nine items inside each action.

“Regulators have publicly indicated their renewed focus on reviewing institutions’ compensation practices, especially in the area of sales incentives offered to employees,” explained Continuity Director of Regulatory I/O Donna Cameron. “The national conversation around major banks’ compensation practices spurred regulators to make compensation a focal point in last quarter’s enforcement decisions.”

“With the new compliance rating system announced in November, examiners have signaled that they will concentrate less on technical, issue-specific compliance,” added Cameron. “They expect to see standardized policies and procedures in place for evaluating and addressing regulatory change and managing compliance. Financial institutions need to accept that compliance has become everyone’s responsibility.”

About the Banking Compliance Index™
The Banking Compliance Index™ (BCI) is a quarterly tracking index published by Continuity’s 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. Key indicators include 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.

Over 800 financial institution professionals registered for the Continuity RegAdvisor® Quarterly Briefing webcast on Thursday, January 12. During this session, regulatory expert Donna Cameron reviewed the Q4 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/.

Media Contact:
Ian Toner
Communications Strategy Group, on behalf of Continuity
[email protected]
720-726-5460