Rate of Enforcement Actions Reaches New High in Second Quarter

Costs, Hours Required for Banks to Maintain Compliance Continue to Rise


NEW HAVEN, Conn., July 15, 2015 (GLOBE NEWSWIRE) -- Enforcement actions hit a new all-time high last quarter, as regulators continued to crack down on non-compliant financial institutions, according to the Q2 2015 Banking Compliance Index.

The index, compiled and analyzed by experts at the Regulatory Operations Center™ (ROC), found that more than 200 enforcement actions were issued against financial institutions (FI) between April and June this year. This is the highest level of enforcement actions seen during the past 20 years, as the ROC has analyzed enforcement data going back to 1995. Second quarter activity increased by a whopping 18% over the previous quarter.

"Regulators are really hitting their stride in their ability to enforce and financial institutions are feeling the pressure," said Pam Perdue, executive vice president of regulatory operations at Continuity. "This isn't a seasonal trend or a blip on the radar; it's the new normal."

Additionally, the average FI needed to devote an additional $41,471 and 582 hours—or the equivalent of 1.72 full-time employees—to managing just the new regulatory changes introduced in the second quarter. That's an $11,000 increase over the level of spending required in the first quarter.

"The average hourly wage for a compliance professional went up more than $2 between the first and second quarters," Perdue said. "The costs of compliance just keep rising, and it's becoming increasingly difficult for many institutions, especially those with tight margins, to manage the added expense."

Even though regulations have decreased in size and complexity in the most recent quarters, compliance needs have persisted. For example, while 73 regulatory changes in 1,644 pages cost FIs $41,471 to manage in the second quarter of 2015, 75 changes in 3,000 pages cost FIs just $34,755 during the second quarter in 2014.

"A lot of bankers might feel like there's less going on when it comes to new regulations these days, but that's really not true," she said. "The rules may be smaller, but that's just making it harder to see just how much has to be done."

About the Banking Compliance Index

The Banking Compliance Index (BCI) is a quarterly tracking index published by the Regulatory Operations Center™ (ROC). 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.

Over 800 financial institution professionals registered for the Continuity RegAdvisor Quarterly Briefing webcast Thursday, July 9th. During this session, regulatory expert Pam Perdue reviewed the Q2 2015 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 provides the only Compliance Core™ for financial institutions. The Compliance Core is engineered to reduce compliance risk and cost by bringing together strategic planning, technical execution and world-class insight into a single, subscription-based solution. These services are delivered using a compliance control platform that is continuously updated with the latest regulatory data from Washington, and best practice compliance processes from other Compliance Core institutions. Built by bankers and former examiners, Continuity's cutting-edge technology and expert personalized service help financial institutions quickly adapt to regulatory change, streamline the workload and ensure compliance. Continuity is headquartered in New Haven, Connecticut, and serves nearly 200 institutions in more than 40 states. For more information about Continuity, visit www.continuity.net.



            

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