NEW HAVEN, Conn.– After issuing a record number of regulatory changes in 2015, regulators levied more enforcement actions against financial institutions in Q1 2016 than in either of the preceding two quarters, according to the latest Banking Compliance Index released by Continuity’s Regulatory Operations Center.
The Index shows that regulatory agencies issued more than 170 enforcement actions against banks and credit unions last quarter, amounting to an enforcement rate of 11.19%.
“Even though agencies issued fewer regulatory changes this quarter, they’re still finding violations of older, more fundamental regulations, and weaknesses in institutions' control environments,” said Continuity’s EVP-Regulatory Operations Pam Perdue.
According to the company, the enforcement rate against FIs has nearly doubled since the BCI was introduced in 2012. More recently, that enforcement rate has remained above 10% over the last five quarters, indicating a “new normal” where more than one in 10 CFIs could face enforcement.
Amidst new enforcement, regulatory agencies still introduced 69 regulatory changes in Q1 2016, which equates to over 425 hours each institution must spend to ensure compliance with new statutes. As more FIs consolidate, the demand and competition for experienced compliance professionals also continues to increase expenses for community banks and credit unions. The average hourly wage for banking personnel jumped nearly $0.50 to $45.63 in Q1 2016.
“At the end of the day, institutions still need the support of more than one full-time employee just to keep up with regulatory issuances from the previous quarter,” added Perdue, referring to the 1,569 pages of new regulations that compliance officials must process. “That says nothing of the time needed to take action to ensure compliance with older rules. As the volume and complexity of regulatory change grows, and oversight toughens, self-directed compliance management is proving difficult, if not impossible.”
According to Continuity, 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.
More information can be found here.