NEW HAVEN, Conn.–This year is on its way to setting a record for enforcement activity against financial institutions, according to the latest Banking Compliance Index (BCI).
The index, compiled and analyzed by the Regulatory Operations Center (ROC), found that 170 enforcement actions were issued against community financial institutions (CFIs) during the third quarter of 2015. To date, 553 enforcement actions have been issued in 2015, compared to 620 in all of 2014.
"It's safe to say that 2015 is shaping up to be a banner year for enforcement, as we're on track to exceed last year's numbers," said Pam Perdue, executive vice president of regulatory operations at Continuity. "Regulators aren't taking it easy on banks, despite the increasing number of regulations CFIs are expected to manage."
The Q3 2015 BCI shows that the average CFI needed to devote an additional $29,145 and 384 hours—or the equivalent of 1.23 full-time employees—just to managing the regulatory changes introduced in the third quarter. So far in 2015, the average institution has needed to spend an extra $100,000 to manage the year's regulatory changes.
According to Continuity—which just introduced RegAdvisor Pro, a new regulatory change management solution—compared to the second quarter, the third quarter saw a slight decrease in the number of new hours required to comply. But, said Perdue, that doesn't mean the regulatory load is getting any lighter.
Looking ahead to 2016, several large-scale regulatory changes will take effect, leaving banks with more changes to institute.
"We're seeing a little bit of relief, compared to this time last year, but the fact of the matter is that banks are still spending at least $30,000 every quarter just to keep up with regulatory changes," Perdue said. "This is the new normal, and the sooner institutions can adopt a uniform compliance management system model and insulate themselves from these increasing costs, the better."
The Banking Compliance Index is a quarterly tracking index published by the Regulatory Operations Center that 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, according to the company. The BCI data sources include CFPB, FDIC, FED, NCUA and OCC. The BCI is calculated using an average size institution of $350 million.